Volatility in the oil patch seems to have shaken things up favorably for refiners. Profit margins, measured by the May/June crack spread, have rebounded from a year-to-date low of $28.28 per barrel, or 8.7%, set two weeks ago.
Yesterday's Energy Department report (see "Oil Price Surge: Will It Help?"), showing smaller-than-expected stocks of fuel on hand, touched off a bout of speculative buying that pushed up the NYMEX spot oil contract nearly 5% to $105.90 per barrel. Heating oil and gasoline futures also rose 3.6% and 2.5%, respectively, in yesterday's floor session. Oil futures-tracking ETFs and ETNs, including the PowerShares DB Oil Fund (AMEX: DBO), the United States Oil Fund (AMEX: USO) and the iPath S&P/GSCI Crude Oil TR ETN (NYSE Arca: OIL) shot up more than 4%.
Follow-through buying in crude oil and heating oil followed in the overnight markets, but gasoline prices flagged as traders had time to digest some of the details in yesterday's inventory numbers. Gasoline stocks, off more than expected for the week, are still 11.2% higher than year-ago levels. Crude feedstock levels are 4.6% lower than this time last year and stocks of distillate fuel oils - the category in which heating oil belongs - are down 7.9%.
Overall, domestic oil production has fallen 3.7% in a year. So, too, have gross imports. The 1.4% slump in oil input to refineries has resulted in a 2.2% decrease in product output. Refineries are now operating at 82.2% of capacity, down from a utilization ratio of 85.9% a month ago.
Today's pricing structure seems to presage the switch from cold weather to warm weather refining priorities. June gasoline rose 5.6% this past week, as it started to price in the typical summer driving season premium. That puts the contract barely a half-percentage point above water on a year-to-date basis. Meanwhile, June heating oil barely registered a two-tenths percent increase for the week, bringing its year-to-date gain up to 11.2%. May crude ended the week 3.4% higher, up 8% on the year.
Gross Processing Margins
Bean patch processors also had a good week as gross margins rose 14 cents a bushel for the November/December crush. For the year, gross processing margins have risen 16.4%, largely due to the demand for soy oil. This week, however, prices for soy meal, a staple animal feed, surged 8% against a 2.7% uptick in oil. Soybean prices rose 4.6% for the week.
