US Gasoline Market Continues To Tighten

Energy

The oil market continues to trade in a largely rangebound manner, with the market still waiting to see how Iranian nuclear talks progress. Yesterday’s EIA report was fairly constructive, with inventory drawdowns reported in crude and products. Crude oil stocks fell by 1.66MMbbls over the last week, with refiners increasing utilization rates slightly over the week, while crude imports fell and exports edged higher. In addition, crude oil inventories in Cushing fell by a little over 1MMbbls, which leaves total stocks at the WTI delivery hub at 44.76MMbbls, the lowest level since March last year.

On the product side, gasoline and distillate fuel oil inventories fell by 1.75MMbbls and 3.01MMbbls respectively. Implied gasoline demand over the week averaged 9.48MMbbls/d, the strongest number seen since March last year. As the US economy continues to reopen, along with the start of the driving season, gasoline demand should continue to edge higher. As a result, gasoline cracks are likely to remain well supported, particularly given that US gasoline inventories are currently not too far off from 5-year lows for this stage in the year. This leaves the gasoline market vulnerable, particularly if we see an active hurricane season, which impacts refinery assets along the US Gulf Coast.

Metals

Comments from US  Fed officials that inflation would ‘prove to be largely transitory’ helped market sentiment as LME metals extended their rally. Copper received additional support perhaps due to the risk of strike action at BHP’s mine in Chile, where workers rejected the latest wage offer. This saw LME 3M copper briefly trade back above the US$10,000/t mark.

The President of the Democratic Republic of Congo confirmed the start of the Kamoa Kakula copper mine, which is jointly owned by China’s Zijin Mining and Ivanhoe Mines. The mine is one of the key projects that would help alleviate mine supply tightness in the medium term. According to Zijin Mining, the mine is expected to bring about 80-95kt copper-in-concentrate in 2021. It could reach its designed capacity of 400ktpa after second-phase completion, which is scheduled for 3Q22.

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Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...

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