Energy Futures Face Meaningful Sell-Off
The recovery rally is under attack this morning as energy futures are facing their first meaningful sell-off in more than a week. Virus fears and OPEC inaction are once again taking the blame, while some weak fundamental data in yesterday’s DOE report certainly aren’t helping encourage buyers to step back in.
Part of the reason products are leading the move lower this morning: U.S. demand continues to look sluggish for both gasoline and diesel, and U.S. refinery runs made a counter-seasonal increase last week, in spite of two major refinery issues. The bulls will make note that at least four other refinery issues have happened since that data was collected, making it unlikely that we’ll see that trend continue.
U.S. gasoline inventories have made their seasonal turn, dropping further away from record highs last week. We should see gasoline inventories continue to drop steadily over the next six to eight weeks as the spring RVP transition gets into full swing. The exception to the rule so far has been in the rounding error known as PADD 4, which saw gasoline inventories set new all-time highs last week, exacerbating the annual feast-or-famine supply swings in the Rocky Mountain region.
U.S. ethanol stocks reached a new all-time high last week, making last year’s fears of a bad planting season risking supply look silly.
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