Markets Rally on Chinese Stimulus

Markets are continuing their slow recovery, with markets hopeful that economic stimulus in China. The large reported uptick in coronavirus infections is now understood to have come from a change in how Chinese infection data was reported, rather than from an actual increase in cases.

The US and China are today rolling back some tariffs as part of Phase One trade deal negotiations, the Chinese central bank has cut rates, and China has commissioned many new projects to spur growth. Still, oil demand projections have been bleak as Chinse refiners cut 1.5 MMbpd of throughput, which will weigh on global oil prices.

In pricing news, 3:2:1 crack spreads (the refiner profits from converting 3 parts of crude into 2 parts gasoline and 1 part diesel) are beginning to recover from seasonal lows seen a few weeks ago. Bottoming around $11.90, spreads have spring-boarded to trade over $16 this week. Gasoline price gains have been in the driver’s seat, while diesel spreads have been moderate at best. With fuel demand weak around the world, don’t expect to see a huge push to the upper-end of the range until March 1, when futures flip to reflecting spring gasoline spec changes.

Price Trends

Crude oil is trading higher this morning, supported by improving conditions in China and the US-China Phase One deal going into effect. WTI crude is trading at $51.93, up 51 cents from Thursday’s close.

Fuel prices are mixed. Diesel continues bouncing back from its rapid descent, though it has a long way to climb before it’s back at normal crack spreads. Diesel prices are $1.6868, up 0.6 cents. Gasoline prices are $1.5733, down 0.6 cents.