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Spring is Bullish Refinery Maintenance Season for Crude

03/19/2019 1:20 pm EST

Focus: COMMODITIES

Phil Flynn

Senior Energy Analyst, The PRICE Futures Group

Today’s energy report, written by Dan Flynn, discusses additional bullish pressure on crude due to spring refinery maintenance season.

Spring has already sprung in the world of crude oil and your gas prices are on the rise. The first sign of spring, more often than not, is rising gas prices and by that measure spring is here. RBOB gas futures are leading the way and retail gas prices have risen for six weeks in a row.

The rising gas prices are being driven by strong U.S. demand and refinery outages, but also because we are seeing this happen at a time when refineries are deep into maintenance. Gas Buddy told MarketWatch that the average price for regular gas was $2.547 per gallon late Monday afternoon, up 4.8¢ from last week’s average of $2.499 and 21.1¢ higher than last month’s average of $2.336. Refiners are desperately missing those heavy barrels of Venezuelan crude oil.

Reuters is reporting that Venezuela has suspended its oil exports to India and views Russia and China as its main export destinations, according to the Azeri energy ministry citing Venezuela's oil minister. The Azeri ministry issued the statement on Tuesday following talks in Baku between Azerbaijan's energy minister and Venezuelan oil minister and president of state-run oil company PDVSA, Manuel Quevedo. "At the meeting... Quevedo said in order to prevent a sharp reduction, various measures are being implemented and diversification of the export market is underway," the statement said.

Don’t’ look for OPEC to help us out. President Trump may tweet about rising gas prices, but OPEC has already made it clear that they are not raising production. Despite speculation that there is a disagreement between the Saudis and the Russians as to whether to extend cuts again in April, the truth is the cuts will already have done their damage to gas prices this summer.

Still, even with $3.00 per gallon gas in our future, gasoline demand will break records because of the strong economy. On top of that record, oil demand in China will continue to rise and with the EU stimulating their economy oil demand will likely rise there as well. The FOMC starts their meeting today, and will likely address its balance sheet, but unless they shock us, their expected patient stance on the unwind will give the bulls an edge.  

Gas and distillate traders need to be hedged. Speculators should have bullish strategies on spreads, swing trades, and position trades. We are moving into squeeze mode.

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