Refined Products Get Attention Amid Low Inventories and Risks of Outages
- Inflation data brought relief to the market and boosted oil benchmarks heading towards a 7-week high.
- American refiners expect a 2H23 with strong gains given the low inventories and high cracks, mainly after the positive data on country’s inflation climbed 0.2% last month.
- China monthly oil imports dropped from June’s near-record highs to their lowest level since the beginning of the year.
- OPEC+ supply restriction keeps providing fundamentals for oil prices to rise further this year, but oil demand for 2024 remains challenging under perspective of a recession in the U.S.
being exposed to some level of volatility by weak crude imports from China in
July, the main oil benchmarks showed a recovery during the week, mainly after
the U.S. inflation data gave positive signals that Fed could not need to raise
borrowing costs in the rest of 2023.
from weather events are growing as high temperatures in the Atlantic Ocean
provide a breeding ground for hurricanes, which may potentially damage refining
facilities on the U.S. Gulf Coast. Given this scenario, hedge funds are
positioning themselves as bullish for RBOB.
Meanwhile, the decrease in inventories reaches other refined products such as distillates, which registered a drop of approximately 1.71 million barrels in the week ended August 4th. In the case that economic activity expands further than expected, diesel will be highly demanded.
Image 1: Finished Motor Gasoline Production (M bpd)
Image 2: Heating Oil (Dólares per Gallon)
Fundamentals Support Oil
Image 3: Bloomberg Commodity vs DXY
Image 4: Net Position RBOB Money Managers
Source: EIA, Refinitiv
Better Perspective for Distillates in the 2H23
Image 5: Distillate Stock (M bbl)