Refined Products Seeing Minimal Gains On Light Volume While Crude Oil Prices See Small Losses

March trading is coming in like a lamb with refined products seeing minimal gains on light volume while crude oil prices see small losses in the early going. 

China’s manufacturing saw its fastest increase in a decade February as the country rapidly reopened from COVID in one of the key early indicators of the economic activity in the world’s largest buyer of oil.  The lack of reaction in oil or product prices to this news suggests that the market may have been expecting even more.

The API reported another large crude oil build of 6 million barrels last week, a third straight week of large increases despite no barrels being released from the SPR during that time.  Refined products saw declines of 1.7 million barrels for gasoline and 341k for distillates in the API figures. The EIA has been showing huge builds also, but isn’t sure where they came from, listing more than 2 million barrels/day of “adjustments” to its inventory levels in the past 2 weeks. Their weekly update is due out at its normal time this morning.

Looking at the April RBOB contract chart (not the continuous RBOB chart that shows the prompt contract each month) we’re already seeing two layers of chart resistance (barriers to prices moving higher) to start the month. There is both a trend line that slants lower from the January highs of $2.85, and comes in today right around $2.65, and the 200 day Moving Average which comes in at $2.6580.  If the April contract can settle above those values, the door is open for a 20 cent increase with only a speed bump in the low $2.70s offering resistance near term.  If they fail to break those resistance levels however, there’s a good chance we could see slide towards the February low of $2.46, which would also come close to filling the chart gap left behind on the continuous chart from the change for March to April.

ULSD charts don’t seem to have nearly as much potential upside as RBOB, as the 3rd bounce off of $2.66 over the past month is already looking like it may have run out of steam.  Colder weather forecast in March, and the potential for a gasoline rally could both help ULSD find buyers again in the coming weeks, but if prices do slide below $2.66, there’s at least 20 cents to fall near term and a slide all the way to $2 can’t be ruled out.

The EIA’s monthly crude oil and natural gas production report showed that domestic production dropped for both in December, marking the first declines in a year as producers struggled with plummeting prices and the big freeze at the end of the month. Stagnant rig counts, and prices dropping further so far in 2023 suggest we may not see those output levels rebound for a while.

A worker at Marathon’s Galveston Bay refinery died after being electrocuted Tuesday.  It’s not clear what caused the accident, or if it will impact operations at the facility. That refinery that has an unfortunate track record for worker deaths, most notably the explosion that killed 15 and injured 180 when it was known as BP Texas City 15 years ago. No wonder Marathon changed the name after acquiring it.

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