Morning Market Overview
New York Mercantile Exchange nearest delivered oil futures and Brent crude on the Intercontinental Exchange settled mixed Tuesday in choppy activity after investors contending with bullish and bearish factors seemed ready to await weekly supply data due out Wednesday morning for direction.
An exception was the gasoline market, with the April RBOB contract rallying to a better than four-month high on the spot continuous chart at $1.7735 gallon, and the gasoline crack spread rallied to its highest point since August, as the preseason rally unfolds. At $17.67 bbl against West Texas Intermediate, the gasoline crack is the highest since Aug. 31, climbing from distressed margins, especially against the Brent contract, with gasoline negative versus the international crude marker for the first seven weeks of 2019. The RBOB- Brent crack settled at $8.37 bbl.
Gasoline supply drawdowns over the previous two weeks amid seasonal refinery maintenance and strong demand have bolstered the RBOB contract, with data from the Energy Information Administration showing gasoline inventory having fallen 4.715 million bbl or 1.8% since mid-January when they reached a record high of 259.615 million bbl.
Compared against year ago, the decline is more significant, with gasoline inventory shrinking a year-on-year oversupply stance by 12.5 million bbl over the period to 3.1 million bbl as of Feb. 22. Yesterday afternoon the American Petroleum Institute reported a larger- than-expected build in commercial crude supplies during the week-ended March 1 while detailing a greater-than-estimated distillates draw. API reported crude supplies surged 7.29 million bbl during the week reviewed, well above calls for a build of 1.5 million bbl. API data showed supply at the Cushing, Oklahoma hub increased 1.13 million bbl.
Supply changes at the Cushing hub are closely watched since it serves as the delivery location for the New York Mercantile Exchange West Texas Intermediate futures contract. Trade sources said API data shows gasoline inventories declined 391,000 bbl, below an estimated 1.75 million bbl draw while distillate supply dropped 3.1 million bbl compared with calls for a drop of 1.5 million bbl.