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Gasoline Futures Have Surged To A New All-Time High On Friday The 13th

Friday, May 13 2022
Market Talk

Gasoline futures have surged to a new all-time high on Friday the 13th, trading north of $3.90 for the first time and making a run at $4 seem inevitable.

Most cash markets in the US are following the lead of futures and are hitting record highs this morning as well, with Midwestern gasoline a notable exception as Group 3 spots dropped to a 40 cent discount below the June RBOB contract. West Coast basis values meanwhile are seeing strong gains this week following reports of more refinery issues keeping supplies tight in the region.

While it may not (yet) be as dramatic as what we’ve witnessed the past month in ULSD futures, the backwardation in RBOB contracts is reaching extreme levels, with the January 2023 contract trading more than $1 below June values. Just as we saw with distillates, this spread creates a challenging environment of huge basis swings and a reluctance by shippers to hold inventory today and sell it for much less down the road.

Don’t worry about most of the shippers however, as the crack spread charts below show margins that have spiked north of $50/barrel for many, which is roughly $1.20/gallon. Think about what your business will do to save a penny per gallon, and imagine what’s happening at those facilities when they can make $1 just two years after most were hemorrhaging cash. Those higher crack spreads seem to be keeping a bid under RIN values as well, with D6 values reaching their highest levels since last August yesterday.

The IEA followed the lead of OPEC and the EIA in estimating a slowdown in global economic growth in the back half of the year in its monthly oil market report, thanks (or no thanks) in large part to demand destruction caused by “soaring pump prices”. The good news, if you’re looking for an end to high fuel prices, is that the agency expects oil output outside of Russia to grow by 3 million barrels/day from May to December, which should largely offset the drop in Russian output. The report does remind us however that the worst of the supply crunch is still ahead of us as most Russian exports have continued thanks to deals struck before their invasion, but those transactions are quickly coming to an end.

Click here to download a PDF of today's TACenergy Market Talk.

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