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Refined Products

Recap: Iran's refusal to accept Saudi Arabia's offer to curtail its own output in exchange for a cut in output by Iran, sent oil prices tumbling to their lowest level in 5 days. November crude oil was trading basically unchanged before the aforementioned news broke, but fell steadily throughout the session as traders dumped any protective length put on yesterday. The sell-off pushed the spot WTI contract through its 50 and 200-day averages, to a low of $44.19. November WTI settled at $44.67 a barrel, down $1.26, or 2.7%. November Brent fell $1.38, or 2.9%, settling at $45.97 a barrel.

Losses were pared late in the session, with oil futures trading above unchanged after the API showed a 752,000 barrel draw in U.S. crude oil stocks. Expectations were calling for a build of 2.8 million barrels.

October RBOB settled at $1.394 a gallon, down less than a penny, while October heating oil lost 3.9 cents, or 2.7%, to $1.41 a gallon.

Fundamental News: Saudi Arabia's Energy Minister, Khalid al-Falih said the meeting between OPEC and non-OPEC producers in Algeria is a consultative meeting.  He does not expect an agreement on output cuts but added that a production freeze deal was still possible later in the year.  Meanwhile, Iran's Oil Minister, Bijan Zanganeh, said it is not the time for decision making, referring to the next formal OPEC meeting in Vienna on November 30th.  OPEC will hold informal talks on Wednesday.  Its members are also meeting with non-OPEC producers on the sidelines of the International Energy Forum.  Several OPEC delegates said the positions of Saudi Arabia and Iran remained too far apart.  Iran's Oil Minister said the country is not willing to freeze its oil output at current levels and does not intend to forge an agreement with other major crude producers at talks in Algeria.  Iran wants to raise its production to 4 million bpd.  Three OPEC sources said Iran insisted on having the right to increase its production to 4.1-4.2 million bpd, while OPEC Gulf members wanted its output to be frozen below 4 million bpd.  An Iranian source said Iran wants 12.7% of any new OPEC output ceiling.  He said Iran is keen on regaining its market share. Russia's Energy Minister, Alexander Novak, met Iran's Oil Minister on Tuesday in what sources said was a new attempt to persuade Iran to limit its production.

Russia's Energy Minister said that OPEC should agree internally and then Russia may join the talks.  He said Russia would prefer to freeze its oil output at current levels.  He also stated that if countries agree, another meeting between producers would be organized.  Several other sources said Algeria and Qatar were also talking to Iran in a bid to rescue a deal.

Later on Tuesday, Iraqi Oil Minister, Jabar Ali al-Luaibi, said Iraq was leading a mediation to bring the viewpoints of Saudi Arabia and Iran closer and bring about an agreement that would lift oil prices.  Iran had rejected a proposal from Saudi Arabia to limit its oil output in exchange for Saudi Arabia cutting its output. 

Venezuela's Oil Minister, Eulogio del Pino, said producers are still talking about removing 1 million bpd from oil markets. He said Venezuela may freeze production for more than 3 months.

According to Bloomberg, crude stocks held at the Cushing, Oklahoma storage hub fell by 200,000 barrels to 62.5 million barrels in the week ending September 23rd.  

IHS data showed that shipments of crude and refined product from the US Gulf totaled 4.11 million metric tons on 104 ships for the week ending September 22nd.  It is up 28% from the previous week's 3.2 million metric tons on 79 ships.   

The head of the IEA, Fatih Birol, said global oil output will exceed demand until late 2017. 

Early Market Call - as of 9:24 AM EDT

WTI - Nov $46.18 up 51 cents

RBOB - Oct $1.4314 up 3.77 cents  

HO - Oct $1.4300 up 2.01 cents

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Natural Gas

Tuesday, September 27th, saw the front-month NYMEX Natural Gas Futures Contracts open at $3.016, two cents above Monday’s closing price of $2.997.  Losing ground early on, prices fell to $2.983 by 9:30AM, though recovered above $3.00 in the following hour.  Sinking to the intraday low of $2.977 by 11:20AM, the contract recouped its losses once again as October traded within a penny of $2.990 for the balance of the day, closing flat on Tuesday at $2.996.

This morning in Globex, WTI Crude was up 42 cents; Natural Gas was down six cents; Heating Oil was up two cents; and; Gasoline was up three cents.  Additionally, cash prices were lower in New York and higher in New England.

Natural Gas Glossary
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