Who Knows What Tomorrow Holds?
My last editorial, dated May 17th, was either about tea leaves or the market needing to take a breather. Either way, since that date the crack spread declined $2.5/bbl, WTI declined over $10/bbl and ULSD futures tumbled $.30/gal.
In that article, I highlighted the fact that refinery utilization was seasonally behind due to turnarounds. Throughput was expected to increase quickly, however, thus putting more product into the market (causing a possible breather for prices). Since then, we’ve seen a 3% jump in production and I’d expect that trend to continue with another 3-5% increase as summer continues. Crack spreads’ topping $20/bbl represents just the carrot the refining community needs to maximize production.
I also emphasized the fact that demand was the big wild card. The U.S. consumer sentiment index posted 15-year highs last month, but the threat of lower global demand has really taken its toll on futures values. My concern here isthis: now is when we should be the most worried future demand as U.S. consumers, generally speaking, don’t save enough and when times are good, spend like there is no tomorrow Now, I don’t what tomorrow holds, but the very real possibility of slumping consumer demand does raise concerns about where we go from here.
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