Gasoil ($/t)Monday 26 February, 2018
The fundamentals improved last week with stocks falling and demand increasing. Stocks are below both the five year average and the level seen last year. Typically stocks trend lower during the spring providing a supportive backdrop to distillate prices. The short term graphs for kero / diesels are improving with momentum indicators bottoming out and there is a risk the ICE Gas Oil Future will try and re-test the highs of $600-$620/t. seen earlier this year.
Gasoline (cents/g)Monday 26 February, 2018
The fundamentals for gasoline weakened last week with stocks increasing by 300,000 bpd on the week and 2.9mb on the year. In addition demand fell by 57,000 bpd. However, stocks should be close to the seasonal peak and demand should trend higher until the late summer providing supportive medium term fundamentals. Traders are also preparing for the annual move to summer specification product with the NYMEX RB Gasoline moving to the summer spec (April) future contract on 28 February. With the April future trading at a premium of 20c/g the risks are firmly to the upside.
Crude ($/b)Monday 26 February, 2018
Although US crude production is higher than the market estimated we are worried that rising US crude exports is resulting in a highly visible draw down in US stocks. The problem with US exports is that there is little visibility on where the crude is going compared to the weekly domestic US data. With US crude stocks below the five year average and the OPEC "mood music" hawkish, there is a real risk OPEC will over tighten supplies. As a result we believe the risks are increasing of a spike towards the long term resistance level of $78/b.