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Refined Products

Recap:  Oil markets moved higher across the board yesterday with NYMEX RBOB (Gasoline) leading the way. October NYMEX RBOB moved higher 3.44 cents to settle at $2.6963 while the incoming November RBOB futures contract was up less at 2.61 cents, settling at $2.5142. The October-November RBOB backwardation (October's premium to November) expanded to 18.21 cents! Since Labor Day, the October RBOB contract has moved from $2.5430 up to yesterday's settle at $2.6963, an increase of 15.33 cents!! Both October NYMEX RBOB and ULSD futures contracts will be expiring, and hopefully the additional volatility that RBOB has contributed to the entire oil complex will expire as well. As Dow Jones Energy News summarized in its morning report, "In the U.S., the oil market has been buoyed by strong refiner demand for crude to produce gasoline, as refinery maintenance on the East Coast and outages on the Gulf Coast have limited supplies and left remaining operating refineries racing to meet demand ... 'Crude be could following products up,' said Andy Lebow, a trader at investment bank Jeffries. 'Gasoline has provided some leadership here.'" (9-30-14) NYMEX ULSD (HO) has managed to stay in a pretty tight range despite the influence of the RBOB contract, settling up slightly yesterday, 36 points to $2.7041, and up only 1.70 cents since last week. As noted yesterday, NYMEX ULSD (HO) speculators are still net short, and have most likely helped keep the contract in this more narrow range.   

On the crude side, November NYMEX (WTI) Crude continues to trade at a premium (backwardation) of $1.08 to December, reinforcing thoughts that refinery demand for crude is still relatively strong despite refinery maintenance. NYMEX Crude settled up $1.03 to $94.57 while ICE Brent Crude only settled higher by 20 cents to $97.20, narrowing the Brent-WTI spread to its lowest level in a year: $2.63. We can point to the increasing WTI contract, and decreasing Brent contract for narrowing this spread. As it continues to narrow, a refiner's incentive to export is reduced, providing potentially more supply opportunities for areas like the East Coast.  "Brent crude has slumped since June, when it hit this year's high of $115.71. Strong supply, a strong dollar and lackluster economic data drove prices to a 26-month trough last week. Brent for November delivery ... has lost more than 13 percent in the third quarter, its biggest quarterly drop since April-June 2012." (Reuters 9-30-14)  

Currently, oil markets are mixed: ICE Brent is 23 cents higher to $97.43. NYMEX Crude is down 5 cents to $94.52, NYMEX ULSD is up 20 points to $2.7061, and NYMEX RBOB is up 67 points to $2.7030. Markets will be looking to economic data on Wednesday including ADP's September payroll survey (expectations of a 200,000 increase in private payrolls), and U.S. ISM manufacturing index to move lower  from 59 in August to 58.5 in September. Additionally, the EIA will release its weekly DOE Inventory Report on Wednesday morning.

DOE Inventory Estimates: Citi Futures is expecting the following increase (build) or decrease (draw) ranges:  1 to 2 MMb build range for crude stocks, last year was a 5.5 MMb build and the 5-year average is a 1.5 MMb build. For gasoline, Citi Future's is expecting a .5 MMb draw to a .5 MMb build range,  last year was a 3.5 MMb build, but the 5-year average is a .3 MMb draw for this report. For distillates, Citi Futures is expecting a .5 MMb draw to a .5 MMb build range, last year was a 1.7 MMb draw and the 5-year average is a .6 MMb draw. For refinery runs, Citi Futures is expecting a 1.5  percentage point decrease in refinery % operable utilization to 91.9%.  MarketWatch will return on Friday, October 3rd.   Click here to view today's Refined Products MarketWatch.

Natural Gas

On Wednesday October 1st, the prompt month NYMEX Natural Gas Futures Contracts opened at $4.182, more than six cents higher than Tuesday’s closing price.  However, this turned out to be the intraday high, as November slipped immediately after the open dropping to the $4.11 level around 10:30AM.  Prices then rebounded to the $4.14 mark and traded sideways throughout the remainder of the morning trading hours and into the early afternoon session.  As traders tried to reposition themselves ahead of the release of the weekly EIA storage report, selling intensified during the latter part of the trading session with the intraday low of $4.017 recorded just minutes before close.  November closed at $4.023 on Wednesday.

The EIA Natural Gas Storage Report is due out at 10:30AM today.  The report is expected to show a 107 BCF injection to storage for the week ended September 26th.  This compares to a 99 BCF injection at this time last year and a five-year average injection amount of 85 BCF.

This morning in Globex, WTI Crude was down $1.50; Natural Gas was up slightly; Heating Oil was down almost four cents; and, Gasoline was down more than five cents.

New England and New York cash prices were up.


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.