Bullish Outlook....For what?

With the federal government stamping a "go" on QE3 - we all can expect the value of the dollar to fall and the price of refined product to continue to rise.  Top this with the EPA coming out with a tentative adjustment to the 2013 RFS mandates on biodiesel to change the 1 billion gallons of biomassed based diesel to 1.28 billion gallons and we see nothing but bulls running in the refined/renewable energy sector.  One issue (domestically) we are going to experience where bears may make there way in, is the crude oil contracts for refineries.  I have heard from a number of sources that many of the large refiners are expected to exhaust their crude contracts at the conclusion of 2012.  Knowing this, we can expect prices to plummet as our increased capacity will not be used to full maximization.  Although refiners will be susceptible to spot pricing, knowing the contracts will exhausted will put pressure on extractors and brokers to sell their volume so wells can continue to run and pipelines continue to push product.  I would expect to see a drop on oil prices during the first quarter of the year.  Depending on which market area you're in (Group 3, Gulf Coast, NY Harbor, ect) this could play a huge benefit in terms of basis opportunity.  If the spot market drops hard, but geographic markets are slow to follow - this may be a good time to purchase some biodiesel/ethanol off an HO/RBOB benchmark as the blowout could be substantial.  Anyone remember the .75 discount to RBOB in Chicago last year?  Yeah - would have been a sweet time to own some ethanol off that contract in the Group 3.....Opportunities are the same with biodiesel.  If basis reaches (as it normally does) .15 - .20 and you're already buying the product discounted to HO .30 - .40 you're looking at .45 - .60 savings off spot rack prices.  Market that at a 5% blend (as it will still be colder during the 1st quarter) and you're looking at a blended savings of around .0225 - .03 per gallon.  Nothing to cash all your chips in on, but every little bit helps.

So the overall market still looks bullish - it is that one crude issue (in 2013) where we may see the bears take over.