Fuel-Price Analysis: Gasoline Has Peaked

Eight reasons the path is cleared for seasonal price decline to begin

Published in CSP Daily News

By  Walter Zimmermann, United ICAP

NEW YORK -- While spot RBOB futures managed to eke out a few pennies of marginal gains above it’s early March peak into a late April high, those feeble gains formed a bull trap. Anyone who bought those new highs have suffered serious losses. This is nothing new. Those who bought new highs in gasoline into late April have been consistently suffering serious losses for over 30 years now.

  • For the years 1983 through 2013 and based on spot NYMEX futures, the average date of the gasoline preseason rally peak is April 28.
  • This year’s seasonal peak was $3.1128 per gallon on April 24.
  • For the years 1983 through 2013, the average decline from the preseason rally peak has been a 25% decline in spot futures value into a mid-July low.

Evidence for $3.1128 as this year’s seasonal peak includes the following:

  • Bearish RSI divergence sell signal the day of the $3.1128 high.
  • The major Elliott wave pattern concluded at $3.1128.
  • The RBOB to Brent spot-split crack spread had already peaked and reversed lower a few days earlier.
  • The same day RBOB peaked, April 24, the June RBOB-minus-Diesel spread peaked and then reversed sharply lower from our pivotal long-term Elliott wave resistance.
  • The day before spot RBOB peaked, April 23, the benchmark June-minus-September RBOB spread peaked into our key Elliott wave resistance.

Over the last 30 years, the price action in three key RBOB spreads has helped us to confirm whether or not RBOB has put in its seasonal peak. These three spreads have all collapsed since April 24. And those dumps lower have broken below key technical support in all three spreads:

1. The RBOB-to-Brent crack spread.

2. The RBOB-minus-Diesel spread.

3. The June-minus-September RBOB spread.

And speaking of key technical support, the dramatic drop in spot RBOB futures prices since April 24 has decisively broken below the key support levels that the bulls needed to hold to have any case for another new high above the $3.1128 level.

The moral of this story: While many things have changed in the gasoline markets over the last 30 years, the tradition of a spring peak has not changed. And those who every new year have a long list of reasons why this year will be different invariably end up paying dearly for their skepticism. All that said, it now looks to us that RBOB has already fallen far enough for the first bear-market correction and for this year's seasonal decline to begin.

Keywords: 
fuel prices, petroleum