Refined Products Made A Strong Reversal Higher Thursday

Refined products made a strong reversal higher Thursday, regaining the upward momentum that had stalled out the day prior. That strength carried through the overnight session with RBOB futures hitting a fresh 7 month high before pulling back around 7am. Oil prices are also cooling their heels to start Friday’s session, hovering near break-even levels for the day after reaching new 5-month highs Thursday.

The strong weekly performance sets up a chance at even higher prices in the coming weeks, with a run at $3 looking very likely for RBOB, and even ULSD should be able to join in that effort if it can break above the March high just below $2.80.

The recent strength in crude oil prices has put some pressure on refining margins, although a recovery in basis values and weaker RINs should both help offset the lower values from the futures market.

The rising crude oil prices also prompted the DOE to cancel their latest rounds of SPR buybacks, with rising fuel prices once again becoming an uncomfortable political issue.

The March payrolls report estimated 303,000 jobs were added in the US for the month, while the January and February estimates were revised higher by 22,000. That strong growth in jobs is consistent with the recent trend showing a resilient US economy, which is giving the FED more reason to hold interest rates steady. The Headline (U-3) unemployment rate ticked lower to 3.8%, while the real (U-6) rate held steady at 7.3%, while the labor participation rate ticked up slightly to 62.7%. Markets didn’t react much to this report as the FED chair already made it clear on Wednesday that the FOMC was comfortable waiting before making any interest rate cuts, which contributed to a big pullback in equity prices this week.

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