Gasoline, Jet Fuel, WTI and ski?

It is a big surprise to many that Gasoline stocks have drawn yesterday in the US. However, that demand has been responding to the lower prices is not a surprise, and that refining margins will be strong due to Gasoline and heavy fuel oil are set to continue for the forseeable future. Yesterday's data in the US not only highlights the supply/demand picture in the US, but similar pictures are also seen in Europe and to a certain extent, Asia. Middle distillates are under pressure from extremely high stocks globally, and in particular, Jet fuel will remain extremely weak until at least the summer months. If airlines are unable to lower airfares into the summer, not only will this affect Jet Fuel demand, this will push consumers into more driving holidays, in both US and Europe, which will in turn strengthen gasoline cracks and also Diesel in Europe.

On the subject of WTI time spreads and WTI-Brent differential, SFOT remains very puzzled by suggestions that some 60-70% of front contract open interest are held by index related funds. If this is true, investors are indeed losing their value every month on the roll, worsened by day traders who front run these rule based rolls. Why the investors are not stopping out or switching into Brent contracts truely puzzles me.

Having been back from 4 days of snowboarding in the popular area of Avoriaz, i realize 2 things. 1) never go skiing during half term holidays if you can avoid it, 2) the war between snowboarders and skiers will never end, thanks to the skier that ramped into my board whilst i got off the chairlift. Good luck with the ski season.



Gasoline days forward cover





Jet demand/Supply