As crude seemingly hits new YTD highs daily while we are literally swimming in the black stuff, there is something hanging over the head of the number chasers and speculators that have been driving the futures price for the past month. As crude storage reaches critical levels all over the world and crude tankers line up in ports hoping to be able to offload their cargo, refiners in Asia are flooding the market with gasoline. This from Reuters:
“Asia contributed more than 50 percent of global gasoline growth last year,” said Energy Aspects analyst Nevyn Nah. “Yet gasoline cracks (crack spreads) are way lower this year compared to the same time last year because supply has overwhelmed.”
Oil market analysts at Barclays said on Monday that “non-OECD product exports… have the potential to move prices lower over the next several months”.
The article goes on to say that Japanese refiners can’t sell enough product at home, so they have turned to the international markets. China is exporting 316% more diesel YoY and gasoline exports have increased by 9%. China is refining more gasoline and diesel than it can consume. Think about that for a minute.
In Singapore, traders have started storing excess gasoline aboard tankers as they run out of onshore storage.
Goldman Sachs already warned late last year that an emerging glut in refined products would eventually spill back into the crude market.
“If all the major consumers sell off their gasoline, it begs the question who will buy it?” said one Singapore fuel trader. “The answer is that much will remain unsold and in storage, and once that happens prices will crash.”
Way back in the dark days of Fall 2015 (remember when?) there was a rather large surprise build of gasoline in one week’s EIA data and crude futures turned to shit in the blink of an eye.
It’s tough to pick a top in any bullish trend, but I think great rewards are coming for patient bears trading /CL. Just watch out for the number chasers and the speculators.
This is a great time to show the world your Patriotism, so go support our AmeroCanadiMexican Automobile Manufacturers and purchase a new pickup or full-size SUV. With $1 gasoline on the horizon you will thank The Maven for his foresight. Who wants a Tesla when electricity is so expensive.
Love your machine.
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