Gasoline futures for April delivery hit record high prices in consecutive trading sessions Mar. 2-4 on the New York Mercantile Exchange, pulling the near-month crude futures price above $53/bbl for the first time since October.
Those price moves were sparked in part by refinery outages in Texas and California. Moreover, the Energy Information Administration said Mar. 2 that input into US refineries fell by 81,000 b/d to 14.9 million b/d with refineries operating at 89.3% of capacity during the week ended Feb. 25.
EIA said commercial US crude inventories jumped by 2.4 million bbl to 299.4 million bbl in that same period, while gasoline stocks were up by 1 million bbl to 224.5 million bbl. However, distillate fuel stocks fell by 1.8 million bbl to 110 million bbl, with the decline equally split between heating oil and diesel fuel. US imports of crude increased by 422,000/b/d to nearly 10.1 million b/d.
"The latest US weekly data certainly reinforces the strong divergence between gasoline and distillate. The gasoline market continues to get soggier, with the run of increases in inventories now having continued for about 5 weeks longer than is normal," said Paul Horsnell, Barclays Capital Inc., London.
The April gasoline contract escalated by 8.11¢ to a record high of $1.4838/gal on Mar. 2, while heating oil for the same month increased by 4.33¢ to a 4-month high of $1.51/gal. The April gasoline price continued to climb Mar. 3, up by 2.37¢ to a new high closing of $1.5075/gal. However, heating oil dropped 1.77¢ to $1.49/gal. On Mar. 4, the near-month gasoline contract inched up by 0.14¢ to a new record of $1.5089/gal, while heating oil slipped by 0.74¢ to $1.48/gal.
Tight distillate market
Still, the approach of springtime "won't be enough to drag heating oil futures below $1/gal any time soon," said analysts at Enerfax Daily. "Growing global demand for distillates like diesel, along with sky-high crude prices, will keep heating oil futures unseasonably strong into summer, underscoring a growing disconnection of heating oil prices and traditional weather-driven consumption."
Although winter weather in the US has averaged warmer than normal this year, Enerfax analysts noted, "Heating oil prices have hit record levels on the NYMEX for this time of year, thanks largely to heavy consumption of diesel and crude oil prices over $50/bbl. March roared in like a lion in the Northeast, ensuring a late-season spike in heating fuel demand and giving extra support to prices."
Market fundamentals "in terms of both incremental demand and refinery production, are dramatically better for distillates rather than gasoline," Horsnell said Mar. 2. "Among the key seasonal distillate markets, even Japanese kerosine is now looking very tight indeed, having started to look rather sloppy at the end of last year before the real chill of winter began. Indeed, Japanese kerosine prices have risen by 9.9% over the past week, faster than any other major commodity."
Extremely cold European weather has given a strong late-season boost to that distillate market. "In the US, increased heating oil demand will eventually be reflected in the weekly [inventory] numbers and add to a base of strong diesel demand," said Horsnell. "US diesel demand hit 3 million b/d in 2004, an [annual] rise of 6.9%, which is a pace one might more readily associate with Asia rather than US trucking. At some point in coming weeks, the weather-related element of distillate demand will begin to fall away, although the element related to strong [gross domestic product] growth will press on."
He said, "The perception of an imminent transition away from a distillate focus will perhaps be the main factor that stops the recent strong price impetus."
Meanwhile, the April contract for benchmark US light, sweet crudes jumped by $1.37 to $53.05/bbl Mar. 2 on NYMEX. That contract closed at $53.57/bbl on Mar. 3, up by 52¢ for the day after trading as high as $55.20/bbl during that session.
Record OPEC basket price
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes temporarily dipped by 9¢ at $46.17/bbl on Mar. 1, after "a remarkable run of no fewer than 14 successive increases in the value of the OPEC basket," said Horsnell. "Over the course of the remorseless run up, the value increased by $6.47[/bbl] and was taken to within 35¢ of its all-time high."
Following the small Mar. 1 fall, however, OPEC's basket price rebounded by 84¢ to a record of $47.01/bbl on Mar. 2, and jumped by $1.35 to $48.36/bbl on Mar. 3.
(Online Mar. 7, 2005; author's e-mail: firstname.lastname@example.org)