Oil and Gas

Gasoline futures hit seasonal spike

Gasoline and Refined Fuels
Oil markets remain volatile, and bullish seasonal features are now the driving force in the U.S. gasoline market. Speculators have already positioned for the price advance off February lows, with those lows likely to endure for several weeks. Considering the calendar, the lows plumbed in February might very well persist through 2016 and the futures contract might have established a long-term low.

In early March, traders have looked to capitalize on the inevitable run-up in driving demand, causing the recent $0.40 gallon jump in many markets. What is generally the experience year after year, gasoline prices are likely to peak around Memorial Day. Should oil rally in May (albeit likely a muted rally), drivers may see gas prices increase into July. Although retail gasoline prices are poised to snap higher, they will remain heavily discounted against pump prices for most of the past decade.

Spring Cleaning
With April in sight we’re fast approaching the peak of the refinery maintenance season. A few things to note:
  – Units will shut for maintenance – though, due to this year’s supply, any real price spike will be mitigated due to the abundance of inventory
  – Moving to lower RVP levels – lowest during the summer
  – Demand will increase as the weather warms
  – Potential to see selloff of crude in April
  – Potential for $40 bbl for U.S. crude in the coming weeks

Crude: Gluttony of supply
The gasoline market is not immune to the bearish fundamentals of crude oil. With the global market still captured by massive oversupply, it is expected to continue building throughout much of the year, although at a slower pace during the second half of 2016. A market rebalancing is not expected until 2017.

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