{"id":49721,"date":"2023-08-17T15:46:28","date_gmt":"2023-08-17T19:46:28","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/uga-is-gasolines-bullish-trend-ending\/"},"modified":"2023-08-17T15:46:31","modified_gmt":"2023-08-17T19:46:31","slug":"uga-is-gasolines-bullish-trend-ending","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=49721","title":{"rendered":"UGA: Is Gasoline’s Bullish Trend Ending?"},"content":{"rendered":"
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In an April 25 Seeking Alpha article on the United States Gasoline Fund, LP ETF<\/strong> (NYSEARCA:UGA<\/span>), I wrote:<\/p>\n

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As oil and gasoline prices have recovered over the past weeks and months, UGA could continue to move higher, reflecting increasing demand during the peak 2023 driving season as drivers could be paying more at the pump as the odometer clicks rise during spring and the peak summer months.<\/span><\/em><\/p>\n<\/blockquote>\n

On April 25, nearby NYMEX gasoline futures were at $2.5630 per gallon wholesale, and the UGA ETF was at the $59.26 per share level. On August 17, September RBOB gasoline futures were 18.8% higher at $2.8406 per gallon. At $71.40 per share, the UGA ETF had rallied over 20%. We are coming up to the end of the peak driving season as students return to school, and the vacation period ends in the fall. Gasoline prices tend to move lower as the demand recedes, and now is a good time to monitor risk levels on long UGA risk positions. However, the ongoing war in Ukraine and rising oil prices could keep fuel prices high during the offseason. Trailing stops could be optimal for long gasoline positions in the current environment.<\/span><\/p>\n

Gasoline prices approached $3 per gallon wholesale<\/span><\/strong><\/h2>\n

After reaching a seasonal $2.0204 low in December 2022, gasoline prices rallied throughout 2023, peaking in July during the heart of the 2023 driving season.<\/span><\/p>\n

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\"Bullish<\/span> <\/picture>
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Ten-Year NYMEX RBOB Gasoline Futures Chart (Barchart)<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n

The ten-year chart highlights the 48.3% rise in wholesale gasoline prices on the NYMEX futures market to $2.9960 per gallon in July 2023. While gasoline futures stopped short of the $3 per gallon level, the price at over $2.80 per gallon wholesale remains not far below the July high in mid-August. NYMEX crude oil futures rose to $130.50 per barrel in March 2022, below the 2008 record $147.27 peak. However, gasoline futures soared to $4.3260 per gallon wholesale in June 2022, a record high above the July 2008 $3.6310 high.<\/p>\n

The gasoline crack spread has been trending higher<\/span><\/strong><\/h2>\n

The gasoline crack spread measures the cost of refining a barrel of crude oil into gasoline.<\/span><\/p>\n

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\"Bullish<\/span> <\/picture>
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Chart of the NYMEX Gasoline Crack Spread (CQG)<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n

The weekly chart shows the bullish pattern in the gasoline refining spread, making higher lows and higher highs throughout 2023. After reaching a $10.65 per barrel low in August 2022, the crack spread rose to a $42.57 high in July 2023. At $38.66 per barrel on August 17, the gasoline crack is not far below the recent high. <\/span><\/p>\n

The elevated crack spreads tell us two significant things about the crude oil and oil product markets. First, it indicates that profits at refineries remain robust. Second, it is a bullish sign for crude oil and gasoline as the processing spread is a real-time demand barometer. The crack spread trend remains bullish in August 2023. <\/span><\/p>\n

Seasonality could be bearish, but geopolitics make 2023 no ordinary year<\/span><\/strong><\/h2>\n

Gasoline tends to reach highs as the peak of the summer driving season approaches. Significant lows often occur during late fall and winter months. Meanwhile, at least four factors could support gasoline prices during the seasonally weak upcoming months:<\/p>\n