Oil (NYMEX:CLQ13) demand is surging and commodities are on a tear as Ben Bernanke helps add into a buying frenzy. Oil and gasoline have led the commodities market to an eight-day winning streak, the best since 2010. The Energy Information Administration set the tone by reporting another massive drawdown in crude supply and surprisingly strong oil demand. U.S. refiners went on a tear refining over 16 million barrels a day for the second week in a row for the best back-to-back weeks since the beginning of the financial crisis responding to the strongest demand for gasoline in nine months. The only fear the bulls have is Egypt and being overbought.
While it seemed that oil was rolling on concerns about Egypt is it is now clear that there is more to the recent oil rally. Refining runs hit an impressive 92.4%. That helped crude supply drop by a whopping 9.9 million barrels. Now normally one might expect to see products build but gasoline supply fell by 2.6 million barrels a sign that gasoline demand is going crazy.
At the same time we had refining issues. Dow Jones reported that New York Harbor spot market reformulated-gasoline blendstock, or RBOB, premiums continued to widen Wednesday amid talk of gasoline production problems at Canada's largest refinery. Traders doing business with Irving Oil said the independent refiner has been buying F2-grade RBOB throughout the week so far, lifting premiums by about 2.75 cents.
Bloomberg reported "Gasoline rose above $3 a gallon for the first time since April after a report that inventories dropped the most in 11 weeks and demand reached the highest level since August. Futures jumped to a three-month high. The Energy Information Administration reported that gasoline supplies fell 2.63 million barrels to 221 million, the fewest since May 31 and the biggest drop since April 19. Demand increased for a fourth straight week to 9.3 million barrels a day, the highest since Aug. 10. "Gasoline is looking better," said Andrew Lebow, a senior vice president at Jefferies Bache LLC in New York.
The EIA total products supplied over the last four-week period averaged about 19.3 million barrels per day, up by 1.6% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 9.1 million barrels per day, up by 2.5% from the same period last year. Distillate fuel product supplied averaged about 4.1 million barrels per day over the last four weeks, up by 12.3% from the same period last year. Jet fuel product supplied is 2.9% higher over the last four weeks compared to the same four-week period last year.
David Bird of Dow Jones writes "U.S. refiners are cranking out gasoline at record rates. But gasoline sales are increasing to China, Argentina, Ecuador and elsewhere, amid slowing consumption by American motorists. Net exports of gasoline in the first four months of 2013 are up 44,000 barrels a day from the same period a year earlier, to a record 377,500 barrels a day, government data show. At the same time, U.S. gasoline demand is down 61,750 barrels a day to a 12-year low of 8.5 million barrels a day.
David Bird says "Excess gasoline supplies in the U.S. are finding a home abroad, where emerging markets want high-quality fuel to feed their growing needs. U.S. refiners also have been able to offer competitive prices because of low domestic crude costs. At the same time, in the U.S., drivers are using more fuel-efficient vehicles, which is denting demand. U.S. refiners, returning from seasonal maintenance and flush with rising supplies from surging shale-oil fields, are pulling down crude stockpiles, which were at an 82-year high as recently as late May. The abundant supply represented by the stockpiles had kept U.S. oil prices trading at a discount to global crude."