Petroleum Futures Prices Crash as Financial Funds Liquidate Positions

Strategic Insights -

Futures prices for petroleum crashed in New York on Friday, driven by financial funds liquidating gasoline positions and technical selling that dragged crude oil below $15/bbl. A substantial amount of trading volume on the New York Mercantile Exchange (Nymex) confirmed a resumption of a broader downtrend for petroleum futures, according to an analyst. The crash was exacerbated by the restart of a catalytic cracker at the Marcus Hook, Pa., refinery complex by Sun Co. Inc. and the likelihood of more refineries returning from maintenance soon.

Key Takeaways:

  • April Nymex gasoline fell 1.40 cents to 48.30 cents/gallon, just 0.10 cents off its intraday low.
  • The selling was triggered by bearish fundamentals, including 18 million bbl higher gasoline stocks compared to a year ago.
  • Technical stop-loss points were triggered, exacerbating the nosedive in petroleum futures prices.
  • The restart of the 90,000 b/d catalytic cracker at Sun Co.'s Marcus Hook refinery complex put pressure on gasoline prices.
  • April light, sweet crude hit a session low of $14.88/bbl, its lowest close since March 31, 1994.
  • The front-month crude contract lost 42 cents to settle at $14.92, its lowest close since 1994.
  • Support levels for the front-month contract are pegged at $14.75/bbl and $14.45/bbl.
  • April North Sea Brent futures on the International Petroleum Exchange dropped 41 cents to $13.59/bbl.
  • The week saw a loss of 53 cents/bbl in crude prices and 58 cents/bbl in Brent prices.
  • Abundant distillate stocks contributed to the decline in heating oil prices, with the April contract dropping to 42.10 cents/gallon.

Statistics:

  • April Nymex gasoline fell 2.97 cents/gallon on the week, putting it about 1 cent above the point where the March contract went off the board on Feb. 27.
  • The crash was accompanied by a substantial trading volume on the Nymex.
  • The restart of the catalytic cracker at Sun Co.'s Marcus Hook refinery complex added to the pressure on gasoline prices.
  • Distillate stocks remain abundant, weighing on the demand for heating oil.
  • The drop in crude prices was the largest since 1994, with a loss of 53 cents/bbl on the week.

Sources:

  • Bloomberg, "Petroleum Futures Prices Crash"
  • New York Mercantile Exchange (Nymex), trading data
  • Sun Co. Inc., press release on the restart of the catalytic cracker at the Marcus Hook refinery complex