Refineries boosted their operation as gasoline consumption increased to an 11-month high in the week ended July 5, the EIA, the Energy Department's statistical arm, said last week. Fuel demand is highest from the last weekend in May to the Labor Day weekend in early September, the prime U.S. vacation period. West
Texas Intermediate crude has jumped 10 percent in July.
“We've got the peak driving season,” Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant, said by phone yesterday. “Crude oil is refined into products and that refining process is going to draw down inventories. Another crude draw would be supportive for WTI prices.”
Eoin Treacy's view The recent strength in oil prices and
the underperformance of gasoline has weighed on the crack spread upon which
refiners rely. The 3:2:1 spread failed to sustain the breakout to new ten-year
highs in February and has since halved. It found support last week and additional
follow through to the upside this week would suggest more than temporary demand
Despite a strong performance in the latter half of 2012, the US refining sector has for the most part experienced its deepest pullback in a number of years. Tesoro and Valero posted some of the shallower reactions and found at least temporary support last week in the region of their 200-day MAs. They will need to continue to find support above last week's lows if the benefit of the doubt is to be given to medium-term potential for additional upside.