Crude oil rose to near 90 US$/bbl in New York yesterday due to markets calming down on the belief that US government efforts to prevent a recession might be satisfactory. Oil is also expected to track up as the US dollar weakens. In the same time crack spreads and refining margins remained under pressure as product prices failed to track rising crude oil quotations. Demand for light distillates is relatively weak in the US while weekly statement of Energy Department showed yesterday that gasoline supplies increased 5.1 million barrels to 220.3 million barrels last week, the biggest gain since December 2006.
In the meantime Diesel consumption is relatively healthy in Europe, resulting in a crack spread of 17.2 US$/bbl for the product in the first four weeks of January, 18.6% higher than in 1Q07. As a result of weak gasoline margins worldwide but relatively healthy Diesel cracks, Brent crack margins averaged at 3.19 US$/bbl ytd, versus 4.1 US$/bbl in 1Q07. This clearly deteriorates sentiment on the downstream sector, however, Diesel heavyweight names, such as Tupras or (22 800 HUF, 0,86%) can be
good picks in this environment.