Monday, March 2, 2015
Both Gasoline and Distillate supplies fell last week, and the U.S. is still awash in Crude Oil. That was the takeaway from Wednesday's Energy Information Administration's (EIA) weekly energy stocks report. For the week ending February 20th, U.S. Crude Oil inventories rose by 8.427 million barrels to a record 434.071 million barrels. U.S. Crude Inventories are running nearly 72 million barrels above last year's levels and nearly 80 million barrels above the 5-year average. Gasoline, however, saw supplies fall by a larger than expected 3.118 million barrels. Despite last week's decline, current U.S. Gasoline inventories are still above both last year's and the 5-year average. Distillate supplies, which include both Heating Oil and Diesel, fell by 2.711 million barrels, with current inventories running just over 13 million barrels below the 5-year average.
U.S. motorists who were rejoicing at seeing a 1-dollar handle on Gas prices to start the New Year are now realizing that the good times may be over, as futures prices have rallied to their highest levels since early December. Some of the gains seen are tied to a seasonal shift by refiners to production of cleaner burning grades of Gasoline required by EPA regulations. Starting with the lead month April future, the RBOB term structure has moved into a backwardation out to the December 2015 contract, which will encourage less Gasoline production to move into storage. This may be necessary given signs that Gasoline demand is starting to increase. In addition, seasonal maintenance as well as labor issues at several U.S. refineries could spell further draws in Gasoline inventories in the coming weeks.
Looking at the daily chart for April RBOB Gasoline, we notice prices starting to breakout to the upside after finding a near-term bottom near the 1.5000 price area. We should note how the 20-day moving average has acted as support and resistance for most of the market movement since July of last year. The 14-day RSI has turned positive, but remains below overbought levels with a current reading of 64.05. 2.0000 looks to be the next major resistance level for the April contract, with support found at 1.6626.
Mike Zarembski, Senior Commodity Analyst