Yesterday ended with crude closing down $0.34/bbl to $45.55, RBOB up $0.0269/gal to $1.2783 and HO down $0.0004/gal to $1.4487.
API data released last night show that U.S. crude inventories had a 7.1 million barrel build, with only a 22,000 barrel build in Cushing, OK. There was a draw in gasoline of 694,000 barrels and a draw in distillates of 2.4 million barrels, but for PADD 1 there were small builds in both refined products. Refinery utilization is down 0.7% from last week; however, in PADD 1 it is down 2.6%.
Refined product crack spreads continue to decrease, due to the inventory builds and lower demand. A crack spread is the differential between the price of crude oil and the oil products refined from it to estimate refining margins. If a crack spread is a large positive number that means the price of refined products is higher than the price of crude oil, resulting in a profitable spread. However, the cost involved to actually refine the product has to be considered because it reduces the margin. Below are the calculated crack spreads from yesterday’s settles:
Heating oil margins are averaging around $15/bbl and gasoline margins are only averaging $6/bbl this year. Below you can see the dramatic decrease in margin in just a few months, especially for gasoline.