Crude strength harming margins.

A rather bearish set of DOE stats yesterday, in particular distillates. Although the tail end of the season, distillate stocks normally gets drawn down these few weeks but the past 2 weeks have seen massive build and does not bode well for distillate cracks. What is even more interesting is that input to refineries are starting to increase, and this is on the back of really high prompt Gasoline cracks. Refineries are tweaking their output to be max gasoline and less distillates. However, it is unlikely to ease the swelling distillate stocks amid waning demand.

As for Gasoline, yesterday's number strengthened the case that demand is picking up at this low prices and although truck miles in January were very low, it will not stop Mr and Mrs Smith taking their car out for a long drive across the west coast vs taking American airlines.

The strength in prompt crude oil is now beginning to have very big impact on refining margins. With Fuel cracks and gasoil cracks losing over $3/bbl in the prompt, light end cracks strong but not astronomical, refining margins globally are coming off hard. At this stage, it may be hard to see flat price or structure making new highs. SFOT has taken off a chunk of his length in Z9 Brent and also Brent spreads M9Z9 yesterday. The fund rolls continue today and peaks tomorrow when the major USO and GSCI roll kicks in. and SFOT is surprised that J9K9 WTI spread is not weaker than it is currently @-1.80. One wonder what lies ahead for the remaining life of the J9 WTI contract.

HOPE for Arsenal as Aston villa cracks under pressure. We may yet get lucky for the 4th spot this year?