Upside for Gasoline crack determined by flat price

The latest set of data from DOE continues to show weakening supply/demand dynamics for the barrel, with the exception of Gasoline. Distillate forward days cover continues to hover at multiyear highs, with demand not looking likely to recover anytime soon, while gasoline days forward cover looks relatively healthy for this time of the year. We seem to be at a cross road here as far as Gasoline is concerned. In my humble view, being long gasoline cracks is now a bear trade in the near term. if crude prices continue to squeeze higher, say towards $75 driven by specs, Gasoline demand would begin to suffer and cracks will see limited upside as retail gas price has almost doubled. As we enter into the peak of the US driving season, SFOT is keeping his gasoline risk small and to the long side.

US Gasoline fwd days cover

US distillate fwd days cover

Obama's trip to the Middle East is seen by some oil fundamentalist as a key event for the oil market. With regards to that front, SFOT has no particular opinion and would not make any short term call on direction based on this recent visit. Instead, he focuses his attention to the rising vol as market took a dive into the close yesterday. Perhaps its profit taking, perhaps its new shorts being entered into. However, as SFOT has come to terms recently, 200day moving averages in all markets seems to be a key support now, and for CLZ9 contract, it has the same pattern and SFOT will also watch this level very carefully.