But we didn't.
Sometimes it's best to just go about your business and let folks believe whatever they want to believe.
This is especially true if you can make a buck off of them and their advisers.
Anyhoo, the thing about the spread is, although it is a bet on cheaper input costs (crude) it is also a bet on being able to maintain your higher price for the end product (gasoline).
And now that's a problem.
March WTI $26.83 down 62 cents after trading as low as $26.52.
The canary in the coalmine of an increasingly desperate energy industry just croaked. With "unusual timing" and at "distressed prices," Reuters reports that Phillips 66 - the major US refiner owned by Warren Buffett - dumped crude oil for immediate delivery into Cushing storage tonight. This sparked heavy selling of the front-month WTI contract (to a $26 handle) and crashed the 1st-2nd month spread to 5 year lows.
It was just last week when we said that Cushing may be about to overflow in the face of an acute crude oil supply glut.
“Even the highly adaptive US storage system appears to be reaching its limits,” we wrote, before plotting Cushing capacity versus inventory levels. We also took a look at the EIA’s latest take on the subject and showed you the following chart which depicts how much higher inventory levels are today versus their five-year averages.
And now with Reuters reporting on major US refiners dumping crude, sparking speculation that the move reflected advance warning of looming output cuts amid sluggish winter demand and record inventories...MOREGasoline prices may have turned the corner for the immediate term but I don't have enough information to make that call. In the meantime we are still betting lower for crude.
Here the hourly gasoline chart from FinViz: