Wednesday Snaps Gasoline’s Six Day Green-Streak, Futures Prices Mixed Today

The energy rally ran out of steam Wednesday with refined products wiping out strong morning gains and ending the streak of consecutive moves higher for gasoline. 

Weak readings on consumer spending over the holidays sent US stocks sharply lower for their worst day in a month, and that negative sentiment seemed to spill over into the energy arena as some traders perhaps rethought their newfound optimism for demand, while the algorithms no doubt saw sell signals flashing after so 7 straight days of increases left the complex in an overbought condition. 

The recent run up in prices has been good for refiners with crack spreads steadily moving higher and reaching 3 month highs this week, at levels that are 2-3X higher than what they were in January the past several years.  Of course, part of the reason for that strength is that not all refineries are operating, with a handful still struggling to get back to full operating rates following the Christmas blizzard.  We’ll get another look at their progress in today’s DOE report.

Yesterday the API reported another large build in crude oil stocks, even though the SPR releases have ended, suggesting that run rates aren’t fully recovered.  Gasoline stocks increased by 2.8 million barrels as we move through the winter demand doldrums while distillates were estimated to draw by 1.8 million barrels.

A Reuters report Wednesday suggests that US refineries will have a busy spring turnaround season after numerous plants delayed work last year to (comply with the White House requests to ramp up fuel supplies) avoid missing out on last year’s record margins.  Combined with already low inventory levels and the numerous unplanned issues so far this winter, that leaves the supply network looking vulnerable once again as we move towards the driving season. 

French refinery workers are striking again, as part of nationwide protests against pension reform.  Last year striking workers caused several plants to cut runs, and contributed to the extreme price swings in the US.  At this point, reports suggest this may be a one day affair that won’t force the plants to close, but could become a price driver if things don’t quiet down soon.

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