Gasoline is leading the oil complex lower today as traders continue to take profit on record long positions and evaluate the Chicago cash sell off yesterday.
Chicago ULSD and RBOB were the big laggards on the physical side yesterday. Chicago ULSD dropped 3.5 cents and CBOB fell 9.5 cents, while the NYMEX ULSD rose 17 points and RBOB fell about 2.2 cents. We’re finally starting to see Chicago prices follow their seasonal trend in the late autumn, both falling compared to other markets. Cash prices have been propped up recently by the slew of pipeline issues and delayed refinery turnaround times. However, a lot of those issues have been resolved and the rather high crack spreads are encouraging refineries to produce more output.
The December ULSD crack spread has risen $7/barrel since July, last trading at $24.67/barrel. This crack spread is normally trading in the low teens at this time of year…a further sign that the heating oil complex is starting out tight this winter. The December RBOB crack spread has also seen a significant boost; it too is trading $7/barrel higher than it was in July, last at $17.12/barrel. A lot of traders anticipate these cracks to weaken as refineries come back online, which should reduce refined products prices relative to the price of crude oil.
Another reason for the sudden fall in Chicago prices were the changes in the Midwest (PADD 2) stockpiles according to yesterday’s DOE report. Gasoline stocks rose 1.3 million barrels to 45.9 million barrels. This level is still short of last year’s 48.4 million barrels, but we have room to build which would be bearish for the Chicago RBOB and potentially NYMEX RBOB crack. Distillate fuel oil stocks decreased by 300,000 barrels to 24.3 million barrels. These levels have ways to go to fill the gap compared to last year’s levels of 30.6 million barrels. A lot will depend on the weather this winter.
December WTI trades lower by $0.20 to $55.13/barrel, RBOB is lower by $0.0182 to $1.7206/gallon, and ULSD is down $0.0104 to $1.8983/gallon.