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Refined Products

Recap: WTI slipped for the sixth straight session, as the downward move in prices gained momentum. With Phillips 66 unloading barrels of oil at Cushing, OK and Monroe Energy said to be cutting output at its Philadelphia refinery by 10 percent, concern of additional cuts circulated the marketplace. This move to unload prompt barrels of crude oil pressured the March16/April16 spread. Having lost 22.7 percent on Wednesday, this spread fell another 18 percent on Thursday, to settle at -$2.63.

After falling to its lowest level in almost 13 years, March WTI pared losses after the Wall Street Journal quoted the UAE energy minister as saying OPEC was ready to cooperate on production cuts. March futures settled at $26.21, down 4.5 percent or $1.24. Brent for March delivery settled at $30.06, down 78 cents, or 2.5 percent.

In options trading, the top 10 most active options were U.S. crude puts, with the March $25 put being the most active contract. More than 19,000 lots traded by midday, while nearly 7,800 lots traded in the March $26 put.  

March RBOB was down less than 0.1%, settling at 94.17 a gallon and March heating oil added 0.4%, to settle at 97.91 cents a gallon.

Fundamental News: UAE Oil Minister, Suhail bin Mohammed al-Mazroui, said OPEC is ready to cooperate on production cuts.  The Wall Street Journal quoted him as saying current prices were already forcing producers outside the group to at least cap output increases.

Genscape reported that crude oil stocks stored in Cushing, Oklahoma in the week ending Tuesday, February 10th increased by 425,000 barrels on the week to 66.761 million barrels.  Stocks increased by 550,000 barrels from Friday, February 5th

Phillips 66 dumped crude for immediate delivery in Cushing, Oklahoma on Wednesday, sparking speculation that the move reflected advance warning of looming output cuts.  The unusual sales of excess oil added pressure to the March/April WTI spread, with the front month discount widening to as much as $2.37/barrel.  It was unclear how many barrels one of the largest US independent refiners sold but three traders confirmed at least two deals traded at negative $2.50 and $2.75/barrel.  Two source said a second refiner was also looking to offload barrels but transactions were not confirmed. 

Some OPEC countries are trying to achieve a consensus among the group and key non-members for an oil production freeze.  The sources said Saudi Arabia might be warming to the idea, though it was too early to say whether the country would give its blessing because any deal depends mainly on a commitment by Iran to restrict its plan to increase exports.

Iran's Acting Deputy Oil Minister Masoud Esfahani said Iran estimates that its oil industry would remain profitable even if oil prices were to fall below $8/barrel.  However he said Iran would welcome any talks between OPEC and non-OPEC producers aimed at finding ways to support international oil prices.  However when asked if Iran was ready to coordinate a production cut, he said "No. Any country won't like to cut."

Goldman Sachs said US WTI crude prices are likely to remain in a $20 to $40/barrel range, with significant volatility, until the second half of the year as China's economic slowdown and a large oil production overhang weigh on markets. 

Iraq's Deputy Oil Minister Fayadh Nima said Iraq is producing an average of 4.5 million bpd of crude despite low prices and internal obstacles.  Iraq expects to load 3.38 million bpd of Basra crude in March, down 6.9% from the previous month. 

Iran's cancellation of a conference when it had been due to unveil investment contracts to international oil firms signals that political feuding is disrupting plans to revive its energy sector. 

Early Market Call - as of 9:00 AM EDT

WTI - Mar $27.71, up $1.50

RBOB - Mar $.9985, up 5.68 cents

HO - Mar $1.0316, 5.28 cents

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Natural Gas

Thursday, February 11th, saw the front-month NYMEX Natural Gas Futures Contracts open at $2.067, two cents above Wednesday’s closing price of $2.046.  Prices dipped below $2.050 in the session’s first twenty minutes on Thursday, and despite a brief recovery, landed just north of the $2.05 mark leading up to the weekly storage report at 10:30AM. As the bearish report hit the wire, prices sunk to $2.007. Continuing lower into the early afternoon, prices reached the intraday low of $1.980 by 12:20PM. With current storage levels now 25% higher than last year at this time, the contract continued sideways to trade within a penny of $1.990 for the balance of the day, as March closed lower at $1.994.

The EIA Natural Gas Storage Report published on Thursday showed a 70 BCF withdrawal from storage for the week ended February 5th – smaller than the market estimate of 77 BCF.  Total working gas in storage was reported as 2,864 BCF, 25.0% above this time last year and 23.4% above the five-year average.

This morning in Globex, WTI Crude was up $1.60; Natural Gas was up slightly; Heating Oil was up four cents; and, Gasoline was five cents.

Cash prices were lower in New York and New England.

Natural Gas Glossary

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