by Brad Zigler
This week, a broad-based rally in the petroleum complex, led by gasoline, gave a boost to refiners' profit margins. Gasoline futures soared to new life-of-contract highs Wednesday in reaction to the U.S. Energy Department's weekly inventory report featuring a larger-than-expected drawdown in stocks. Gas inventories fell by 5.5 million barrels, nearly four times the level expected by insiders. Still, fuel demand has been falling over the last month relative to last year's levels, indicating the emergence of some elasticity.
For the week, the June unleaded reformulated blendstock contract rose 5.3%. Year to date, the June contract's price has risen 7.5%. Heating oil for June delivery gained 2.2% for the week, counting the effect of an unexpected rise in the distillate's stocks. On the year, the June contract‘s price has ratcheted upward by 23.7%.
Crude oil for May delivery hit new highs in reaction to a reported 2.3 million-barrel decrease in stocks instead of the broadly based expectation of a 1.5 million-barrel inventory increase. For the week, the May contract price rose 3.7%; for the year, it's up 17.2%.
The interplay of price hikes over the past week fattened refining margins by a half-percent. The May/June (3:2:1) crack spread stood at $36.34, or 10.5%, with the crude oil input settling at $114.93 per barrel. June gasoline and heating oil outputs settled at $2.9200 and $3.2345 per gallon, respectively.
Gross Refining Margin (3:2:1 NYMEX Crack Spread)
The introduction of the United States Heating Oil Fund (AMEX: UHN) last week finally gave securities investors a crack at trading the gross refining margin, a play heretofore limited to futures users. The securities product spread, however, tracks the unlevered weekly gain in the May/June margin only with adjustment.
|
|
May/June NYMEX 3:2:1 Spread |
ETF Spread (3:2:1) |
ETF Spread (2:1:1) |
|
09-Jun-08 |
$33.21/bbl |
$111.80 |
$74.31 |
|
16-Jun-08 |
$36.34/bbl |
$115.75 |
$77.59 |
|
Net |
+9.4% |
+3.5% |
+4.4% |
A 3:2:1 futures spread is created by buying three May crude oil futures and simultaneously selling two June gasoline contracts together with one contract for June delivery of heating oil. The securities-side analogue is built by buying three round lots of USO against the short sale of two lots of UGA and one lot of UHN. A 2:1:1 version can be effected by selling a round lot, each, of UGA and UHN against the purchase of two USO lots.
Soybean Crush
Soybeans were higher in the overnight markets thanks to short covering ahead of this morning's export sales release from the U.S. Agriculture Department. Net sales were down 18% percent from the previous week, but up 21% from the prior 4-week average. Primary destinations included China, Japan, Germany, Taiwan and Mexico.
For the week, the November bean input contract was up 30 cents per bushel, or 2.4%.
Short covering in soy meal was also featured in the overnight market, while bargain hunters bid up bean oil futures. Export sales of meal were 36% higher than the previous week and 28% greater over the prior 4-week average, primarily due to increased shipments to the Philippines, the Dominican Republic and Poland.
December meal futures fell $6.50/ton, or 2.1%, this week while soy oil for December delivery ticked up 3 cents per pound, or 5.7%.
This week, the gross margin for processing soybeans in the November/December harvest cycle fell to 94 cents per bushel, or 7.4%, on a $12.735 per-bushel input cost.
Gross Processing Margin (CBOT Soybean Crush)
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