Morning Futures Roundup

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Gasoline Bulls in the Driver's Seat Going into the Summer
 Fundamentals

Gasoline futures continue to hover near their highest levels of 2009, as higher Oil prices and lower refinery operating rates have some traders looking at tighter supplies as summer approaches. Poor operating margins have provided little incentive for refiners to ramp-up production so far this year.

In addition, weak domestic demand due to the continued economic slump has curtailed Gasoline imports --  especially from Europe.  However, some analysts believe that the recent price rise has about run its course. Gasoline bears cite more refineries coming out of seasonal maintenance period, which should bring more production back online. Also, there is no sign that U.S. gasoline demand will improve greatly, as the Energy Information Administration announced that gasoline use had fallen by 1.2% during the 4-week period ending on May 8th. 




The Memorial Day holiday has been seen as the start of the peak summer driving season in the U.S., and there is much debate regarding whether gasoline demand will climb as consumers lean towards longer weekend driving vacations closer to home, or whether they will postpone vacations entirely.  How this plays out could help determine the direction of Gasoline prices going into the 3rd quarter of 2009.

Near-term, large speculators have voted in favor of higher gasoline prices, with the most recent Commitment of Traders report showing large non-commercial traders net-long 56,375 contracts as of May 12th.  This was up just over 5,000 contracts for the week.  However, should Gasoline futures prices begin to top, this long position could add further fuel to any sell-off when the long positions are liquidated. 

Gasoline inventories are expected to have declined last week, with analysts looking for a draw of 1.4 million barrels ahead of this morning's weekly EIA energy stocks report. This comes after a surprisingly large 4.1 million barrel draw the previous week.


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