Gasoline Takes A Breather

Surprising numbers in the API release yesterday (Tuesday), for a change at least. Gasoline building by 1.65mio bbl and distillate turned into a small seasonal draw. Little wonder Gasoline cracks have come off recent highs. However, supply side is one thing. Out of the whole barrel, days cover looks the least worse in Gasoline, especially into the driving season. SFOT is now tempted to use this dip to buy into gasoline vs heat/gasoil crack if demand numbers today does not turn out to be bad.

WTI-Brent spread in the front months have come off a fair bit since the high yesterday. Whatever has driven this spread seems to have cooled off for now but clearly the wild movement is only concentrated in the very prompt month while the back end of the curve have hardly moved. The reason is probably attributed to stops, techical upside triggers, and then more stops. Some researchers argue driving season now should see WTI, the sweet grade favoured over the others as they have a higher gasoline yield. That is a very valid reason, but why now?

We have seen that gasoline yield is already picking up over the past month or so and that cracks were going a lot higher when WTI was still significantly under Brent. Moral of the story is, prompt WTI-Brent is hardly fundamentals anymore.

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