Lower U.S. Output Not Enough to Move the Needle

By: Daniel Guttman / March 1, 2016

Today, April becomes the front-month contract for refined product futures (RBOB and ULSD), triggering physical spot product to trade at a premium last night. April’s RBOB now reflects summer-grade gas, which includes a low RVP requirement. Because this specification is more expensive to produce, April RBOB futures gained over 27 cents per gallon compared to the expiring March contract. April ULSD also gained about $0.0175/gal in the roll.

Despite sentiment that an agreement for a production freeze could be near and a reported decline in U.S. output, prices were trading at a gain again this morning; however, they have since rebalanced. Yesterday, WTI crude rose 36 cents to $34.11, HO finished up $0.0425 to $1.0937, and RBOB gained $0.3041/gal to $1.3207.  HO is currently flat, while RBOB is trading down about $0.0306/gal.

Despite the advances we’ve seen over the past couple of weeks, it is still likely that prices could fall back to January levels. Outlook is quite bearish for the first half of 2016, with global stocks adding an average of 1.32 mbpd and OPEC output of 33 mbpd. Even if we were to see supply and demand balances sooner than expected, there is still the colossal stock overhang to tackle. The only hope for tighter fundamentals at this point is if OPEC and non-OPEC producers are able to cooperate to construct believable, substantial output cuts.

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Categories: Daily Market Update


Daniel Guttman

Written by

Daniel Guttman

With a background in wholesale and commercial sales as well as pipeline scheduling, Daniel is currently the Manager, Business Development in the Card Access Fuels department. He is tasked to find new and innovative solutions to increase sales opportunities for the sales team while managing and evaluating internal department processes. He assists with day to day personnel management, customer data analysis, as well as the daily Pacific Pride inventory and pricing direction.


Guttman Energy Daily Market Update Disclaimer – The information contained in this market update is derived from sources believed to be reliable; however this update could include technical inaccuracies or typographical errors and Guttman Energy does not guarantee the accuracy, completeness or reliability of this update. FURTHERMORE, THIS UPDATE IS PROVIDED "AS IS," WHERE IS, WITH ALL FAULTS AND WITHOUT ANY WARRANTY OR CONDITION OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY. GUTTMAN ENERGY ALSO SPECIFICALLY DISCLAIMS ALL EXPRESS AND IMPLIED WARRANTIES. YOU USE THIS UPDATE AT YOUR SOLE RISK. This update and any view or comment expressed herein are provided for informational purposes only and should not be interpreted in any way as recommendation or inducement to buy or sell products, commodity futures or options contracts.


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