U.S. gasoline prices have risen 12% in the past month to average $3.51/gal as of Jan. 28, according to AAA, threatening the Federal Reserve’s fight against inflation and potentially extending last year’s big rally in refiner stocks.
While winter storms in December contributed to reduced supplies, mild weather in January may have led to more drivers getting behind the wheel, pushing up pump prices, AAA said, adding that oil prices were supported by market optimism that global oil demand would show higher than expected in 2023 due to the reopening of the Chinese economy.
in a “seasonally unusual pattern,” gas prices rose higher throughout January,” Bespoke Investment Group said. “While prices have historically risen on average less than 1%” year-to-date through Jan. 26, “this year’s increase was 9.16%.”
Gasoline exports have roughly doubled from last year, and China’s reopening means more people are using the fuel.
Diesel is rising again towards 2022 highs, with crack spreads reaching more than $60/bbl last week, from $50/bbl in November and $25/bbl a year ago; Diesel could rise further as Europe bans Russian oil products from February 5.
Companies have been shutting down multiple refineries for maintenance in recent weeks; with less fuel being sent to market, prices rise.
“We’re seeing tailwinds re-emerging for US refiners,” said Bank of America analyst Doug Leggate, favoring Valero Energy ( VLO ), PBF Energy ( PBF ) and Marathon Petroleum ( MPC ).
ETFs: (NYSEARCA: USE IT), (NYSEARCA: UGA), (NYSEARCA: LEG)
Valero ( VLO ) was the first of the major refiners to report fourth-quarter earnings this week, easily beating Wall Street estimates.