Just one month ago West Texas Intermediate crude prices fell to -$40 per barrel. There was too much supply and too little demand. In 30 days, the price has rebounded to $30, or a $70 swing. That’s great, but it’s not high enough for U.S. oil and gas companies to make money. They need to sell more refined products, such as gasoline and are counting you, as well as consumers around the world, to buy it.
Gasoline was one of the fuels the hardest hit by the lockdowns as restrictions on mobility cut demand for the motor fuel by more than 50% in several regions.
In Asia, gasoline profit margins turned positive on Tuesday for the first time in nearly two months as demand started to pick up. European margins remain negative, but traders said they expect a recovery as more refineries shut down units to deal with a glut of diesel.
Lee Dal-seok, senior research fellow at the Korea Energy Economics Institute, said:
“In terms of demand recovery, gasoline demand will improve first, followed by diesel and jet fuel.”
The recovery in gasoline contrasts with a weaker outlook for diesel where slow demand and oversupply are still hurting refining margins.
U.S. margins to refine crude into distillates have fallen to $10.45 a barrel, the lowest since at least 2009.
Meanwhile, U.S. gasoline stocks have fallen for three consecutive weeks to 252.9 million barrels, according to data from the Energy Information Administration. Analysts expect U.S. gasoline stocks to fall for a fourth week. That’s great news because it gives refiners a reason to buy more oil and turn out more product, but what if Americans enjoy “staycations” this year in light of the coronavirus fear?
Are you comfortable loading up the car for a 500-mile trek to the beach, staying in hotels, eating at restaurants, and visiting gas stations and rest stops? Some people will be, but others will stay home. We just don’t know how many.