RBOB cracks test fresh highs as Biden pledges faster US vaccine rollout

RBOB cracks were testing fresh 3½-year highs March 12 as a rising fuel demand outlook pushed refined product prices higher against crude.

NYMEX April RBOB settled up 1.2 cents at $2.15/gal, and April ULSD climbed 81 points to $1.9675/gal.

US President Joe Biden in a March 11 speech pledged all US adults would be eligible for the COVID-19 vaccine as soon as May 1, in an effort to bring the nation "closer to normal" by the July 4 Independence Day holiday. The accelerated rollout, coupled with the signing into law of a $1.9 trillion stimulus bill earlier in the day, has raised hopes for a strong demand recovery as soon as early summer, analysts said.

The pledge "is a gamechanger for fuel demand forecasts," OANDA senior market analyst Edward Moya said in a note. "Car bookings and plane tickets are indicating Americans are going to travel big this summer, and that should help bring back fuel demand."

Back to back weeks of steep inventory draws has pushed US gasoline supply more than 6% behind the five-year average in the week ended March 5, according to US Energy Information Administration data. Stocks were below normal in all regions outside of the Rockies, with Midwest stocks nearly 8 million barrels behind the five-year average.

The widening gap between expected demand increases and tightened supply has pushed RBOB cracks steadily higher since mid-February.

The ICE New York Harbor RBOB crack versus Brent climbed to around $20.40/b in afternoon trading, on pace to close at the highest since August 2018.

Biden's comments build on increasingly bullish outlooks for the second half of the year.

In its closely watched Monthly Oil Market Report released March 11, OPEC revised up its forecast of 2021 oil demand by 220,000 b/d to 96.27 million b/d, but said the recovery would be backloaded in the second half of the year, after disappointing data in Q1.

While OPEC raised its full-year demand outlook, it revised lower those for the first and second quarter, citing lingering high US unemployment and continued pandemic restrictions in Europe. Crude prices settled lower amid these weakened near-term outlooks and a stronger US dollar.

NYMEX April WTI settled 41 cents lower at $65.61/b on March 12, and ICE May Brent declined 41 cents to $69.22/b.

The ICE US Dollar Index climbed to around 91.69 in afternoon trading, up around a quarter of a percentage point from the session prior.