With little happening on the price front today, here’s a take on some issues pertinent to the market:
- Gasoline prices have fallen dramatically thanks to too much production and too much inventory. The following charts show gas dropping much more than crude, resulting in crack spreads rarely seen at this time of the year. With spreads this low heading into the heart of driving season, we could see refinery run-cuts, which could result in crude builds and improved crack spreads.
The chart on the right shows gasoline prices decreasing significantly more than crude prices, depicted in chart on left.
Note the difference between 2016 (black line) and 2015 (pink line). We're seeing historically low gas crack spreads.
- The June jobs report showed a surge in payrolls, but job growth was weaker in Q2 than any quarter over the last four years. Yet, the U.S. economy seems to be in fairly good shape. “We’re going from very strong job growth to solid-enough job growth,” said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh. “The U.S. economy is still on pretty solid ground, especially relative to Europe.” The solid shape of the economy will likely put off any talk of an interest rate increase until December.