Negative Sentiment Spills Into Commodity Space

The energy complex is selling off following Monday’s partial holiday, with negative sentiment from equity markets appearing to spill over into the commodity space.

The ripple effects of the coronavirus continue to manifest in various ways, from Apple’s earnings forecasts, to disruptions in waterborne trade. The EIA added more color to its demand estimate reductions for 2020 this morning due to the direct and indirect impacts of the virus, while also highlighting the bearish impact the record-warm winter has had on heating demand.

RBOB continues to outperform the other petroleum futures contracts as reports of additional unplanned downtime at the Bayway, NJ refinery keep upward pressure on cash prices and calendar spreads. The chart below shows that the March/April RBOB spread, which represents the difference in winter and summer RVP grades, has already been reduced by nearly one-fourth since news of that refinery downtime first broke.

While the RBOB strength may be the most notable, it’s certainly not the only contract seeing relative strength due to unplanned refinery hiccups. Group 3 ULSD basis values rallied more than a nickel last week thanks to a pair of unplanned shutdowns, while west coast values remain at lofty levels as it seems like there’s a new report of a refinery unit problem almost daily.

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