I am not at all surprised by the recent strength in the gasoline futures market. In fact, I expected this type of market action as the gasoline oversupply fundamental should quickly balance as the economy begins to re-open and people will commute in their own automobiles and forego the trains and planes. Recreational vehicles sales are off the chart as families want to vacation with “social-distancing” and no hotels. People are just getting in their cars and cruising around or driving out to the country. They’re also likely to jump state lines into states that are fully open.
While we see the demand side fundamental increasing, it’s important to know that nearly 33% of refineries in the U.S. are still offline. We will likely see several large weekly draw downs in gasoline stocks over the next one to two months.
As the economy continues to re-open, and workers return to work, how do you prefer to travel? I like the August RBOB contract which is currently trading .9720 at the time of this writing. I don’t think that $1.50 is out of the question. Every penny is worth $420. Futures strategies are not suitable for everyone, so I also have some limited risk option strategies if you’re interested.