According to Simon Constable of Barrons, “Experts say gasoline prices won’t venture far from the recent month futures of $1.50 a gallon on the CME.” High inventory means that gas prices won’t swing much higher or lower–meaning that gas prices are stuck in neutral.
Max Pyziur of the Energy Policy Research Foundation believes that the gasoline industry is part of today’s “range-bound markets.”
The “crack spreads” reveal how much money a refinery stands to make from the process of taking crude oil and making into gasoline. Today, the “crack spreads” remain low.
Scotia’s Howard Weil reports that on the East Coast crack spreads have dropped from $11.59 in 2015 to $6.31 in the first quarter of 2016. By the second the crack spread rose to $9.38.
Max Pyziur, senior advisor at the Energy Policy Research Foundation, states, “Since gasoline prices fell from the $3-to-$4 range, there has been a shift in purchasing less fuel-efficient autos.” Inventory overhang is project to not increase.
Constable encourages traders to sell calls when prices surge over $1.70 as well as sell puts “that pay out” when prices decrease below $1.30. He explains that investors can make money if “investors willing to play the options market, but it will require taking on significant risk by selling options rather than buying them.”
Read the whole story at Barrons.
Constable is an economics/financial markets commentator. Currently, he writes the monthly “In Translation” column for The Wall Street Journal, and a weekly investments column for U.S. News & World Report. He also contributes regularly to Barron’s, TheStreet, Fortune, Forbes.com and other publications.
Prior to becoming a full-time economics journalist/commentator Constable worked in a variety of strategy/advisor roles for major corporations.
His first book, The WSJ Guide to the 50 Economic Indicators that Really Matter, won an economics category award in the 2012 Small Business Book Awards at Small Business Trends. It has been translated into multiple languages. He authored the Rudolf Wolff mini-guides to the London Metal Exchange, and the Real Money Guide to Investing in Gold.