Petroleum Products Still in Charge

Jul. 12, 2023 - 1 minute 30 seconds
Oil platform out at sea.

Product markets such as gasoline and heating oil felt the brunt of the early year energy market weakness as demand concerns ran rampant and crude inventories rose. Despite the sour tone and slumping crack spreads, deeper and prolonged refinery maintenance, strikes in France, sanctions and other issues, we saw product inventories continue to drain. As oil markets continue their downtrend, crack spreads have held relatively firm and have begun to recover as the depleted stocks start to be repriced.

This begs the question: Are energy market fundamentals truly unwinding and will there be a renewed slump in product prices, or are prices set to continue recovering as the market re-calibrates to the fundamentals? Our view is that positioning and liquidity conditions are driving the current disconnect between prices and fundamentals in the oil market, and that strong crack spreads, even as refiners recover from early year woes, may be the first signs of a market starting to return to fundamental pricing.

With product demand proving resilient, we envision support for crack spreads and project a bout of further product outperformance which should lead to a broad energy market recovery.

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Portrait of Ryan McKay


Senior Commodity Strategist, Rates, FX, and Commodities Research, TD Securities

Portrait of Ryan McKay


Senior Commodity Strategist, Rates, FX, and Commodities Research, TD Securities

Portrait of Ryan McKay


Senior Commodity Strategist, Rates, FX, and Commodities Research, TD Securities

Ryan is a Senior Commodity Strategist for TD Securities in the Rates, FX, and Commodities Research group. He provides global market analysis of precious metals, base metals and energy markets that is used in producing trading strategies disseminated to the institutional, commercial and retail trading desks in Toronto, New York, London and Singapore along with the wider external TD Securities client base. Prior to joining TD Securities, Ryan held positions on the buy-side in the areas of FX trading and global asset liability management (ALM). As an FX trader he was responsible for the hedging of fund currency exposure through trading FX forwards and swaps. In global ALM he was responsible for maintaining and reducing portfolio interest rate risk. Ryan holds a Master of Financial Economics from the University of Toronto/Rotman School of Management and has a Bachelor of Business Administration from the University of New Brunswick.