|
Energy: Declining US gasoline inventories supported energy prices |
|
28.03.08 21:38 |
| | | Energy: Declining US gasoline inventories supported energy prices
In the course of the general selloff in the commodity markets, energy prices lost some ground as well, but were able to recover during this week. US gasoline prices in particular rebounded quite strongly, supported by a larger-than-expected decrease in US gasoline inventories.
Gasoline surged to a fresh record high and is currently trading at around USD 2.71 per gallon while heating oil prices stand at around USD 3.11 per gallon. Crude oil prices rebounded amid lower-thanexpected increases in US crude oil inventories. Moreover, crude oil prices were supported by a pipeline explosion in southern Iraq that cut supplies to the key export terminal in Basra. WTI and Brent crude oil prices are currently trading at around USD 106.50 and USD 104.50, respectively. Natural gas prices stand at around USD 9.70.
Since September last year, US gasoline inventories have been recovering quite strongly from their depressed level and are currently well above their 5-year average. While inventories are ample, this week we have seen an unexpected strong drawdown in US distillate inventories, particularly in the gasoline market. In our view, this has been triggered by lower production and fewer imports, mainly as a result of the low refinery margins that currently prevail in the gasoline market. While heating oil prices have closely followed the strong price increases in the crude oil market, gasoline prices have not kept up with this performance.
Consequently, “crack spreads”, the difference between gasoline and crude oil prices, are hovering at very depressed levels. US refinery utilization rates fell for the third straight week and are now down to 82.2%. This is well below normal seasonal levels of about 88% and is the lowest reported rate since October 2005 in aftermath of Hurricanes Rita and Katrina. In our view, this drop in refinery utilization can not be explained solely by refinery maintenance.
We are rather inclined to think that the low refinery margins prompted US refiners to cut production in an attempt to stabilize a weak refined product market. Moreover, according to the Energy Information Administration, the low refinery margins appear to have reduced European crude runs as well and weakened export markets. The transition of the European light duty vehicle fleet to high diesel dependency has reduced the value of gasoline produced by European refineries in their home markets. And now low margins in US gasoline markets have deprived European refiners of an economic channel to dispose of surplus gasoline production.
The lower refinery utilization should help gasoline prices to catch up with the performance of crude oil prices, in our view. Lower gasoline production and imports should be supportive for gasoline prices. On the other hand, the low level of refinery utilization should weigh on crude oil prices. Moreover, we expect crude oil prices to decline over the next few months due to the slowing global economy and an improving supply situation. Consequently, we expect to see widening gasoline crack spreads, especially when demand for gasoline seasonally increases.
source: CS
| |
|