Add this to the sundry of factors that point towards a dramatic economic slump, in the not too distant future. These statistics will either predict the next recession, or create a great opportunity to invest in distressed assets.
Contracts for delivery in the summer months are currently priced less than $20 a barrel higher than crude oil. If those premiums were realized, they would be the smallest since 2010, when the U.S. unemployment rate was above 9 percent.
That’s too low, Goldman analyst Damien Courvalin said in a research note Wednesday. Last year, gasoline’s premium fluctuated from $23 to $33 a barrel above crude as American drivers drove a record number of miles.
Gasoline’s premium has slipped this year as record production boosted inventories to highest level since at least 1990. Refineries have already started cutting back output, though, and several will soon temporarily shut down for maintenance.
That should boost gasoline enough that the only way summer premiums could be as low as they’re currently priced is if the U.S. economy began to shrink, causing driving demand to fall, Courvalin said.
“The demand implied by such margins would be consistent with a U.S. recession, which our U.S. economist team estimates has only a 15 percent to 20 percent probability of occurring,” Courvalin said in the note.
I claim no expertise in the premiums required for gasoline traders. I do know, however, that there is a dislocation between reality and the one that the analyst community are living in now.
By summer, I suspect we’ll find out who was right, looking back on these confusing research notes.
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Where I live the cars have been non-stop. Traffic backup everyday. Hotels are at capacity. It was this way before the crash, but circumstances are different. Wal-Mart numbers may be a good tell. Seems every country but ours is in trouble.
hockey guy loves this