Swollen Diesel Stockpiles Threaten Oil Price Recovery

Swollen Diesel Stockpiles Threaten Oil Price Recovery

Bloomberg  | Sep 17, 2020 06:36

Swollen Diesel Stockpiles Threaten Oil Price Recovery

(Bloomberg) -- The oil market has a diesel problem and it’s not letting up.

While crude stockpiles in the U.S. are sitting at the lowest since April, supplies of distillates, which include diesel, heating oil and jet fuel, are continuing to swell and skyrocketed to the highest level for this time of year in U.S. government data going back to at least 1991. At the same time, demand for the fuel, often viewed as an economic barometer, is at the lowest since late July.

It’s a stubborn glut that is presenting a headache for refiners that need to meet demand for gasoline, but also require an outlet for the diesel that will inevitably be produced as they ramp up output. A lull in air travel due to the coronavirus pandemic has also caused jet fuel to pile up, contributing to the growing supply.

The result is brutal for companies trying to make money turning crude into gasoline and diesel. A key metric that measures diesel’s premium to West Texas Intermediate crude futures, known by traders as the diesel crack spread, plummeted to $6.56 a barrel after an Energy Information Administration report on Wednesday, the lowest since June 2010.

The slide in the crack is the “worst possible scenario for refiners,” Bob Yawger, director of the futures division at Mizuho Securities USA, wrote in a note.

Refiners have little incentive to run their plants harder in the wake of weak margins and record distillate inventories. It also doesn’t bode well for crude futures.

“If they don’t crank up the run rate, they will never burn off the crude oil overhang already in storage,” Yawger said. It’s “bearish for crude oil prices.”

©2020 Bloomberg L.P.

Related News

Latest comments

Add a Comment
Please wait a minute before you try to comment again.
Discussion
Write a reply...
Please wait a minute before you try to comment again.

Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

English (USA) English (UK) English (India) English (Canada) English (South Africa) English (Philippines) English (Nigeria) Deutsch Español (España) Español (México) Français Italiano Nederlands Português (Portugal) Polski Português (Brasil) Русский Türkçe ‏العربية‏ Ελληνικά Svenska Suomi עברית 日本語 한국어 简体中文 繁體中文 Bahasa Indonesia Bahasa Melayu ไทย Tiếng Việt हिंदी
Sign out
Are you sure you want to sign out?
NoYes
CancelYes
Saving Changes

+

Download the Investing.com App

Get free real time quotes, charts and alerts on stocks, indices, currencies, commodities and bonds. Get free top of the line technical analysis/predictors.

Investing.com is better on the App!

More content, faster quotes and charts, and a smoother experience is available only on the App.

';