Fuel Flash – March 2023

Oil spent all but one day below $80/barrel in February. Oil prices continued to fall into the mid-to-low $70s/barrel to start the month with builds in fuel inventories. Just like with the current stock market, high inflation news seems to have a negative effect on oil prices. Fears of a recession still loom large due to central banks raising interest rates. The following graph shows the daily price movements over the past three months:

February did have its fair share of hiccups causing some pricing volatility. A disastrous earthquake in Turkey caused global supply concerns and some icy weather in Texas caused regional supply issues which helped oil prices to briefly rally. However, there appears to be too much downward pressure on the market which is keeping a lid on oil prices. In addition to the builds in inventories and recession fears, mid-month the Biden administration announced another release from the Strategic Petroleum Reserve (SPR) of 26 million barrels. Supply continues to outweigh demand.

The graphs below show the movement of crude oil (converted to gallons) along with wholesale and retail fuel prices over the trailing 15 months:

Retail margins bounced back in February. Diesel margins saw their third highest level in the past 15 months. Wholesale prices fell much quicker than retail creating the large spread. Gasoline margins returned to an average month in February after a very low month in January to start the year. The following graph shows the retail margins over the trailing 15 months:

Crack spreads were slightly lower in February compared to last month as seen in the graph below. So far in 2023 they remain above average, but it does appear they will end up lower overall compared to 2022.

Oil ended the month about where it started at roughly $76/barrel. According to AAA, the national average gas price decreased by about $0.15 to $3.35/gallon. The national average diesel price decreased by roughly $0.28/gallon to about $4.40/gallon.

As mentioned above, supply continues to outweigh demand due to factors such as a lukewarm winter, builds in oil inventories, a slow China economy coming back online, and fears of a recession. There will be the occasional spikes with any news of winter storms or supply disruptions, but the market seems to be capped for the time being at roughly $80/barrel. Sokolis believes that oil prices will remain in the $75-85/barrel range. We will do our best to keep you updated with the latest news.