There’s A Tug Of War Between Gasoline And Diesel Prices This Week As RBOB Futures Come Under Heavy Selling Pressure

There’s a tug of war between gasoline and diesel prices this week as RBOB futures come under heavy selling pressure, while ULSD looks poised to make another run at $4.

The dichotomous action between gasoline and diesel prices pushed the premium for ULSD more than 90 cents/gallon above RBOB futures, something we’ve never seen outside of the chaotic early days of the war in Ukraine. When the October contracts take the prompt position next week, the spread will be north of $1/gallon as RBOB transitions to its winter spec, which may also explain part of the weakness in the gasoline contract recently as traders realize that the driving season is rapidly coming to an end.

US equity markets are another bearish influence on gasoline prices lately as the correlation between the two has been the strongest in the past two years, just in time for the summer stock rally to run out of steam. Yesterday was the worst day in 2 months for the S&P 500, and it appears that the sellers trickled into the gasoline arena. Distillates meanwhile seem to be ignoring the move in stocks and more in line with the fact that the world is still facing a severe supply shortage which may get worse this winter. 

Speaking of which, the Saudi Energy Minister (an outspoken critic of speculators in the oil market) expressed his displeasure with oil markets trading lower in the past 2 months despite the global energy supply crunch, and suggested it may cause OPEC to cut production. That statement helped oil prices bounce after an early selloff Monday which was blamed on news that negotiators were closing in on a deal with Iran, even though the US state department says significant gaps remain. 

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