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Refined Products

Recap:  Oil markets finished mildly lower yesterday after the release of the EIA's weekly DOE Inventory Report. Total commercial crude stocks increased yet again, 3.5 MMbs, but within expectations. Cushing crude stocks declined .8 MMbs, helping to mitigate the overall increase as NYMEX Crude (WTI) closed down 31 cents to 101.44.  NYMEX ULSD (HO) declined 2.17 cents to 2.9809 with results of a .6 MMb build creating  slightly bearish pricing versus expectations of a .3 MMb decline. Total gasoline stocks only declined .3 MMb upon expectations of a much larger decline of 1.9 MMb, and moved to an intraday low of 3.0606 before recovering to 3.0935, down only 17 points on the day. ICE Brent crude moved down to a 108.60 low before moving back up to settle at 109.11,  16 cents lower than the previous close. It appears that this 108.50 area is providing some support under Brent as traders are reluctant to sell with on-going tensions between Russian and Ukraine. Russia exports 4 MM barrels per day of crude oil and 1.5 MMbpd of products, and according to Tim Evans of CitiFutures, "any interruption in those export flows would certainly be a high impact event." Recall, the highest ICE Brent crude price since the annexation of Crimea is 111.42, and could be considered a benchmark price if additional sanctions impact these Russian exports. 

Currently, oil markets have recovered from their declines yesterday with NYMEX ULSD up 59 points to 2.9817, NYMEX RBOB up 91 points to 3.1026, NYMEX Crude up 34 cents to 101.78, and ICE Brent up 33 cents to 109.44. 

DOE Inventory Highlights:  Total commercial crude oil inventories increased 3.5MMbs to 397.7 MMbs, an 83-year high. Crude inventories have increased 13 of the past 14 weeks since January 10th, also around the time when the southern leg of the Keystone XL pipeline opened on January 22nd.  One would expect at some point, with these historic crude stocks, that NYMEX WTI prices should start to move lower. However, as mentioned in previous MarketWatch reports, the destocking of PADD 2's Cushing, OK storage center where the WTI contract is priced, continues. Cushing  inventories have now fallen 15.8 MMbs since January 22nd, and as result, has shrunk the premium of Gulf Coast Louisiana Light Sweet (LLS) Crude to a 68 cent premium over NYMEX WTI futures price from over $10 in mid-January. Why is this important? Well, at some point the shipping fee, estimated to be between $1.75 to $2.00 per barrel, will keep Cushing barrels from flowing if those costs cannot be recouped, as it currently appears, and Cushing tanks will start to build again. Hopefully, WTI prices will move lower. At some point, NYMEX WTI, will need to be considered the international crude benchmark, replacing Brent.

One stand out in yesterday's report was that refineries operated at 91% of their operable capacity for the week ending April 18th. Previously, refineries operated at 88.8% the week ending April 11th, and at 83.5% a year ago.  PADD 1 (East Coast) % operable capacity was lower at 84.6%, higher than last week at 79.2%, but lagging a year ago at 88.6%. Quietly, the Strategic Petroleum Reserve is moving lower 1.4 MMbs in the past 2 weeks as part of the "Test Sale."  Total distillate stocks stand 2.4% lower than last year, while PADD 1 is down 6.7% for the same period. Gasoline stocks are down 3.6% in total and also 3.6% lower in PADD 1. Robust refinery runs will hopefully keep enough products supplied for domestic use as driving demand increases.

Click here to view today's Refined Products MarketWatch.
Natural Gas

On Wednesday, the front-month NYMEX Natural Gas Futures Contract opened at $4.767 – almost three cents above Tuesday’s closing price.  For most of the day, there was little movement as Traders are waiting on the EIA Natural Gas Storage Report which is due out at 10:30AM today.  The intraday high -$4.777- occurred a little before 10AM.  After falling to the $4.75 level soon after, prices rose to –and stayed around- $4.76.  That is, until just after 2PM when traders began unloading positions.  Prices fell to $4.725 just before 2:30PM and Wednesday closed at $4.730.  In Globex, WTI Crude is up 34 cents, Natural Gas is up four cents, and Heating Oil & Gasoline are both flat.

The EIA Natural Gas Storage Report is expected to report a 48 BCF injection to storage during the week ended April 18.  At this time last year, 30 BCF was added to storage and the five-year average injection figure is 47 BCF. 

New England and New York cash prices are both up modestly.

Natural Gas Glossary 

For access to Sprague’s full Natural Gas Market Watch Report including commentary not posted here, please send your request to or call 1-855-466-2842.