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Refined Products

Recap: For the first time in 5 sessions, WTI settled below $50 a barrel on bearish U.S. inventory numbers and fading belief that OPEC will adhere to output cuts agreed upon by the group. Early in the session, January WTI traded above $51 a barrel, but slowly drifted lower as the release of the inventory numbers drew near. Despite total crude oil stocks decreasing by 2.4 million barrels, the report is being viewed as bearish. Stocks held at Cushing, OK, the NYMEX delivery point, increased 3.8 million barrels, while stockpiles for both gasoline and distillates increased. January WTI fell $1.16, or 2.28%, to settle at $49.77. Brent for February delivery settled at $53 a barrel, down 93 cents, or 1.72%.

January RBOB ended at $1.508 a gallon, down 2.8 cents, or 1.8%, while January heating oil fell 2 cents, or 1.2%, to $1.618 a gallon.

Fundamental News:  Saudi Arabia's Energy Minister, Khalid al-Falih said the country is committed to meeting global oil demand, including the US.

Nigeria's Oil Minister, Emmanuel Ibe Kachikwu, said OPEC's deal to cut output will proceed even if Russia becomes the only non-OPEC country to commit to reduce output at the meeting this week.  Meanwhile, Nigeria, which is exempt from the output cuts because of militant attacks on its oil infrastructure, hopes to increase its production to 2.1 million bpd next month from its current level of 1.9 million bpd.  Fourteen non-OPEC countries including Russia have been invited to meet with OPEC on Saturday.  The UAE's Energy Minister, Suhail bin Mohammed al-Mazroui, said he was optimistic that non-OPEC producers would pledge cuts.  He added that the oil market needs prices that provide an incentive to invest in production.  He said even at $50/barrel, there have been declines in investments.  Separately, Venezuela's Oil Minister, Eulogio Del Pino, said that the oil market would rebalance within six to nine months and that OPEC aimed for moderate prices within a range of $60-$70/barrel.  He said OPEC is aiming for a moderate but not too high oil price. 

Russia's Oil Ministry's representative, Olga Golant, said Russian oil producers have supported proposals by the ministry to cap oil output.  He said Russia's Oil Minister, Alexander Novak will provide details on the proposals at a meeting between OPEC and non-OPEC oil producers in Vienna on December 10th. The heads of Lukoil, Gazprom Neft, Tatneft, Novatek and Surgutneftegaz met Russia's Energy Minister for about an hour.  Lukoil's Chief Executive, Vagit Alekperov, said no decision has been made on how to reduce production.  He added that the ministry has not issued recommendations on quotas for the cut.  Meanwhile, the head of Surgut, Vladmir Bogdanov, said a production cut had been discussed at the meeting.    

Turkmenistan has received an invitation to take part in a meeting between OPEC and non-OPEC producers in Vienna on December 10th but does not plan to attend it.

Libya's National Oil Corporation evacuated non-essential staff from the Es Sider port after reports of military clashes nearby on Wednesday but was not suspending any loadings.  The NOC said it held emergency meetings with subsidiaries and had begun emergency measures near the fighting.  This came as East Libyan security forces said they had thwarted an attempted advance by a rival faction towards major oil ports including Es Sider while rival fighters withdrew from a nearby town. 

IIR reported that US oil refiners are expected to shut in 113,000 bpd of capacity in the week ending December 9th, increasing available refining capacity by 312,000 bpd in the previous week.  IIR expects offline capacity to fall to 61,000 bpd in the week ending December 16th. 

Early Market Call - as of 9:00 AM EDT

WTI - Jan $50.27, up 49 cents

RBOB - Jan $1.5114, up 26 points

HO - Jan $1.6211, up 27 points 

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Natural Gas

Wednesday, December 7th, saw the front-month NYMEX Natural Gas Futures Contracts open at $3.720, nearly nine cents above Tuesday’s closing price of $3.635.  After entering the market in disarray, prices soon swelled higher to mark the intraday high of $3.748 at 9:50AM, as below-normal temperatures have pushed from the north into the Rockies and Central U.S.  Sloping downward through the ten o’clock hour, the contract then retreated further to fall as low as $3.650 by 11:30AM.  A promising bout of buying in the early afternoon eventually gave way to see the market decline, as January closed lower on Wednesday at $3.603.

The EIA Natural Gas Storage Report is due out at 10:30AM today.  The report is expected to show a 35 BCF withdrawal from storage for the week ended December 2nd.  This compares to a 76 BCF withdrawal at this time last year and a five-year average withdrawal amount of 61 BCF.

This morning in Globex, WTI Crude was up 34 cents; Natural Gas unchanged; Heating Oil was unchanged; and, Gasoline was down slightly.  Additionally, cash prices were higher in New York and New England.

Natural Gas Glossary

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