Risk Is Back On As Easy Money

Risk is back on as easy money, some positive (AKA - less bad) economic data, and refinery issues all combine to push refined product prices 11 cents or more above their Monday morning lows.

After bad news from the FED last Wednesday led to the biggest selloff in months, good news from the FED that they were expanding their bond buying program helped spark a large rebound rally on Monday. As has been the pattern the past few weeks, that rally impacted both equity and energy markets, with the DJIA rallying more than 1,000 points from its early morning lows while crude rallied by three dollars/barrel and refined products added seven to eight cents from morning levels.

In addition, this morning we’re seeing positive retail sales data for May (the largest monthly increase ever, following the largest monthly decrease ever) and reports that a new trillion dollar stimulus plan is in the works. What’s a trillion between friends anyway? That news has the DJIA up another 900 points, while refined products are adding another four cents in the early going. The big test now is if prices can punch through their June highs, and continue the rally, or if this week’s roller-coaster ride is setting the side for a period of sideways trading.

Refinery issues are helping products outpace the rally in crude, giving crack spreads a much needed boost for beleaguered refiners. Both the Motiva Plant in Port Arthur, Texas (which is the largest refinery in the U.S.) and the P66 plant in New Jersey (a key contributor to the NYH market) were reported to shut units due to unplanned issues Monday. The Motiva news came on the heels of a separate report that the company would be combining its product and chemical facilities as a cost cutting measure due to the COVID-19 fallout.

The IEA’s monthly oil market report said that the second quarter was ending on an optimistic note, as global demand destruction was not quite as bad as expected, although "still unprecedented,” and the recovery in mobility sets the stage for a strong rebound in 2021. The report did suggest that weakness in jet and kerosene demand is likely to keep negative pressure on refinery margins for multiple years.

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