Upside Risk to Gasoline Prices Despite Lower Demand Growth: BofA

Gasoline prices and cracks could still climb higher in 2024 despite expectations for lower demand, according to Bank of America.

• Prices have been boosted by as much as 30% so far this year driven by tight fundamentals and the transition to summer-grade specs amid unplanned outages, refinery maintenance and attacks on Russian refineries. The April RBOB gasoline -WTI crack is up 34% since the start of the year.
• Gasoline demand growth is expected to slow from previous years to average around 220kb/d y/y compared to >900kb/d y/y in 2023 on re-opening effects.
• “A deceleration of this magnitude would typically concern gasoline bulls, but the supply side may be setting the market up for the next leg higher.”
• Other upside risks are low seasonal US gasoline storage, high octane blending component prices suggesting a market “even tighter than last year”, and no sign of attacks on Russian refineries stopping. Gasoline yields could also be limited with summer RBOB-ULSD spreads still negative.
• “Specs added RBOB length recently, but positioning does not appear too stretched, giving RBOB room to run.”