Refined Products Move Into the Red After 2 Days of Gains

Refined products are moving into the red after 2 days of gains, with the war in Iran somewhat of an afterthought to end the week after being the only thought to start it. Crude oil prices are ticking modestly higher to start the day, erasing some of the gains in crack spreads we’ve seen in the past couple of weeks.

From a technical perspective prices have moved back into a more neutral territory, but the April tariff demand fears setting a floor and the June supply fears setting the ceiling creates a very wide range of nearly 80 cents/gallon for ULSD and 50 cents/gallon for RBOB, suggesting that any sideways trading to come may include some larger swings than we’ve been accustomed to in the relative quiet of the past couple years.

The squeeze is on: The July HO contract is prices at more than an 8 cent premium to August, which will take over the prompt position on Tuesday. That spread has reached an 18 month high, and has also pushed the premium for diesel to gasoline to its highest level since February. While it’s certainly a noteworthy move this week, given that the July contract expires Monday, and that forward contracts aren’t making similar moves, this seems like a flash in the pan caused by a lack of liquidity and perhaps some unfortunate traders getting caught short and forced to cover this week rather than an indication of more extreme backwardation like we saw in 2022 and 2023.

Most cash markets have already rolled to trading vs the August HO contract so the increase in the spread isn’t impacting those prices as much, but LA spot values have seen a strong rally this week after reports of another upset at a local refinery which wasn’t reported to the AQMD.

Today’s interesting read: Why the analysts at RBN who predicted the RIN price collapse two years ago believe the new RFS policy will force another price spike due to the proposed changes that not only raise blending requirements, but also reduce the benefits for importers. (Subscription required)F