Unfolding the Volatility in Gasoline & Gas Oil Futures Prices.

As depicted in the graph below, gasoline and gas oil futures prices have been on the rise since December 2023, with increases of 12% and 11% respectively. This can be attributed to geopolitical tensions, including the bombing of Russian petroleum refineries by Ukraine, the US's targeting of an Iraq militant commander, and attacks by Iran-affiliated groups in the Red Sea. These tensions have disrupted petroleum supply lines, driving prices up.

Historical futures prices for gas oil and gasoline,Year-to-Date.

Furthermore, the futures prices for March contracts for gasoline and gas oil, closely linked to crude oil prices, have been bolstered by a decrease in crude oil inventory levels. Data from the US Energy Information Administration shows a 3.44% drop in crude oil stock levels compared to last year. Additionally, in November 2023 OPEC+ agreed to voluntarily decrease oil production by 2.2 million barrels per day, further tightening supply amid rising demand.

Despite optimistic economic forecasts for North America and Western Europe, the CPI data released on Tuesday 13th Feb 2024, revealed inflation levels dropped from 3.4% to 3.1% contrary to the projected 2.9%. This sparked doubt about potential interest rate cuts by the U.S Federal Reserve. This uncertainty prompted traders and investors to take short positions, resulting in a sharp decline in gasoline and gas oil futures prices, with decreases of 1.32% and 3.7% respectively as observed in the graph below.

Gasoline & gas oil futures prices for March 2024 contracts for the week ending 16th Feb 2024.

However, as the week progressed, prices experienced a slight uptick, attributed to a 1.5% increase in oil's global benchmark and corresponding rises in March contracts for WTI and Brent futures. As Manish Raj, MD of Velandera Energy Partners, aptly noted, "Oil is just waddling up since nobody wants to be short into the weekend when the tailwinds favor oil price." This demonstrates the interplay between geopolitical events, economic indicators, and market sentiment in shaping energy futures markets. Investors should closely monitor these factors for potential future trends.




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