June Heating Oil vs Brent Crack

The crack of June HO vs June Brent has fallen today to its worst value since early July of last year when we saw a spike low for the crack at a value of near $22.25.

The DOE stats today do not paint a very positive picture for HO, as demand fell on the week by over 1/2 MMBPD to a weak total demand of 2.985 MMBPD. This figure lags behind the prior 2 years' demand by 500 to 800 MBPD.

One supportive element to a degree is the fact that the refinery runs this week are below those seen the past 3 weeks, thus suggesting that refiners are in a minor maintenance mode and or done ramping up from the very low levels seen earlier in the year when weather disrupted operations.

The crack is likely being negatively impacted by the worries over crude oil supply that have gripped the market the last several weeks, which has seen speculative interests raise their net long position.

Technically momentum favors the crack narrowing. Support is possible at the aforementioned spike low seen last July at the $22.25 area. We have attached the Daily Continuation (DC) chart for the crack in order to gauge where further support below might come in. That support value from the DC chart looks to be just above $20. Upside resistance in a rally for the June HO versus Brent looks to be in the $25 area.

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