Steve Murphy

Negative Gasoline Crack Spread Unsustainable

Medlo,

You make valid points. However, demand will respond to lower gasoline prices. Additionally, refinery configurations range from the simple to the complex. Refiners running heavy, sour crudes have the advantage, especially while the distaillates sector of the barrel continue to perform economically. You will see reductions in refinery runs from the owners of simple configurations. Several have already been announced in recent days.

(money.cnn.com/news/new...)

A combination of renewed demand from lower prices and several production curtailments can tighten things in a hurry.



On Nov 03 09:06 AM Medlo wrote:

> Keep in mind that Petrochemical demand in Asia is off a cliff, Naphtha
> is trading well below WTI, this will continue to weigh on gasoline.
> Also, natural gas is very inexpensive vs crude, so butane is cheap
> and during the winter, butane content in gasoline increases, also
> adding to the supply glut. Demand trends are down, the drop in prices
> will not reverse this in the US as people are finally waking up to
> the benefits of smaller efficient cars, realizing that money wated
> ina gas guzzler is better used for the kids education, food, etc.
> As long as distillate cracks are holding up, refiners will continue
> to run and one can easily see a prolonged negative gas crack. Also
> keep in mind many refiners run lower quality crude oil that trades
> at several dollars less than WTI.