ParrotStock's avatar
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Gas Cracks Down
Looks like gas cracks are continuing to trend down after getting a little bump up last week. They haven't been this low since January.

That said, diesel cracks remain quite strong, and holding in the mid-40's as they have been since March.

Overall 5-3-2 cracks have dropped about 10% to $28/bbl. As long as they stay above $20, refiners will continue doing well.

What's interesting, is what will happen to the market as refiners keep production high to meet diesel demand, and excess gasoline starts to build? Does driving demand increase to stabilize gasoline prices, or do we see an ever widening gab between gasoline and diesel?

Interesting times in the fuel business.

Regardless, refiners will continue to report record numbers over the next couple of weeks, and will remain profitable for some time. No need to re-hash the risks and opportunities again here... just take a look at my last few memo's. 😊

I'm working on location this week, so updates may be a little slow getting out, but I'll do my best.

Have a great week!

🦜
Conor Mac's avatar
Have a great week Parrot!
joseph's avatar
are you going to take any short positions or wait for a possible buy?
ParrotStock's avatar
@jdub I’ve bought some refining positions going into earnings. As I mentioned, even with gas cracks down, diesel cracks are holding steady, thus overall margins are still quite good historical.

Q2 will likely be the top for revenue, but the rest of the year should still be above current projections. I don’t think the upside is priced in yet.

We will find out soon enough 😊
OilMan69's avatar
Do you even believe the DOE's recent gasoline data? Really strange that the DOE reporting site went down for over a week suddenly in June (never happened before) as prices were surging, and ever since, the DOE has been reporting massive declines in gasoline demand - even below summer 2020 peak covid demand levels - causing prices to crash.

It doesn't make any sense. There are substantially more cars on the road than there were summer 2020. GasBuddy continues to show rising gasoline demand, reaching a 2022 high in late July, and other gov't data is showing y/y increases in miles traveled. Refiners on their earnings calls are saying the same thing - they have continued to see strong/rising demand (Valero said they set a sales record in June) and have explicitly rejected the idea that gasoline demand is crashing ... based on what they are actually experiencing. Aramco increased their wholesale crude price well above Brent - physical markets are very tight. So why would the DOE be reporting a collapse in gasoline demand when all other outlets are saying the exact opposite?

I don't want to go full tinfoil hat, but it's hard not to... there is significant disconnect between what the DOE is saying and what everyone else is saying... and it is an election year...
ParrotStock's avatar
@oilman69 There is definitely some political games going on to try and convince the market to lower prices. We are pushing max rates across the board, so that can help supply; but to your point, demand is 100% not lower than summer 2020 when no one was on the road anywhere. I'll see if I can get some inventory numbers from our terminal guy's.
ParrotStock's avatar
@oilman69 I don't have terminal data from 2020, but I have "all product" volume from our terminals starting in 2021. Comparing 2021 to 2022, March 1 through July... 2022 throughput is pacing about 1% higher, so basically on par with 21. That could be an indication that our terminals are maxed out. I don't have actual storage volume levels, but I'll see if I can get them. There is definitely not a drop off... we are pushing as hard as we can, and selling every barrel.
OilMan69's avatar
@parrot exactly my point 😂 it doesn’t line up! Perhaps when the official monthly data comes up, it’ll prove the weekly data wrong and prices will recover
ParrotStock's avatar
@oilman69 Definitely think this is temporary propaganda. We are running full out, selling every drop, no inventory build anywhere. If there is the slightest supply disruption, prices are going to rocket (they may anyway).

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