Gasoline Traders Are Positioning for a Rebound

Our Research — August 25, 2022

Markets By Alex Malitas

Continuing with our commentary on energy markets, gas prices at the pump exploded higher for US and global customers. Both crude oil and natural gas exhibited divergence in sentiment and positioning. Gasoline shows a similar trend to a lesser extent. 

    • Bloomberg – US Retail Diesel Prices Rise for First Time in Two Months, Hitting $4.98 a Gallon

      US consumers are also competing with overseas buyers for the world’s most in-demand fuel. US refiners have been exporting a massive amount of diesel to buyers in Latin America and Europe who are attempting to sidestep Russian fuel. Diesel prices in the US face more upward pressure as upcoming refinery maintenance threatens to further deplete already-low stockpiles. The country’s distillates inventories, which include diesel, are at their lowest in more than two decades for this time of year, according to government data.

    • Summary

    Continuing with our commentary on energy markets, gas prices at the pump exploded higher for US and global customers. Both crude oil and natural gas exhibited divergence in sentiment and positioning. Gasoline shows a similar trend to a lesser extent. 

    Comment

    Retail gas prices moved significantly higher in 2022 as Russia invaded Ukraine and policy adjustments around the world restricted the necessary supply. Gas peaked in June and has fallen sharply since.

     

     

    The chart below shows the results of Consensus Inc’s survey of newsletter writers. It plots the percentage of respondents who categorize themselves as bullish on gasoline. 

    In recent weeks, the percentage of respondents indicating bullish sentiment has fallen from extreme levels, reflecting the recent downturn on gas prices as nations have mobilized to address supply issues.

     

     

    The chart below shows data from the CFTC’s Commitment of Traders Report. Large speculators are holding a smaller net long position than they typically have the last few years, yet their net long has actually risen in recent weeks as sentiment has soured.

     

     

    Conclusion

    Traders are moving closer to neutral sentiment but are extending their bullish positioning in yet another energy market divergence. The uncertainties that lie ahead for the macro environment have cast overwhelming doubt on the future direction of energy markets.