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Thursday, February 17, 2022
Gasoline Seasonality Analysis - Rally on the cards?
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* This performance is only observed with historical backtests and not traded by the company.
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Historically, gasoline prices have been very seasonal. Prices for Gasoline tend to be lower in the winter and higher in the spring and summer months. November to January marks extreme cold temperatures in the USA with icy and snow-covered roads, resulting in fewer cars and lower gasoline demand. On the other hand, people are excited to go on road trips or take vacations after a long and harsh winter resulting in increased gasoline demand during the spring and summer months. Since February marks the end of the winter season and March marks the beginning of summer/spring, gasoline prices tend to rise between February to April. Besides, the ongoing geopolitical tensions between Russia and Ukraine are painting a favorable background for the energy market.
As can be seen in the image below, the period from February to April has typically been positive for Gasoline, with March providing the best return. In March, gasoline prices have edged higher in 15 out of the last 16 years. The energy commodity delivered an average return of 8.4% in March, with the maximum return being 35.9% and the ultimate loss being 58.9%. The year 2020 was an exception where prices fell drastically (-58.9%) in March due to global lockdowns enacted to contain the pandemic. The loss was quickly recovered in the subsequent months from April to June, where the commodity price almost doubled.
Heat map for Generic Gasoline Contract (Monthly returns over the last 16 years)
It is important to understand that the seasonal patterns and pricing tendencies described here can be affected by other fundamentals, such as weather and production issues in other grain importing or exporting countries and past patterns may not always hold true in the future.
Risks and Assumptions for Back-tested trading strategies
Data Source: Bloomberg
Data as of : 17/02/2022
Arun Leslie John
Chief Market Analyst
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