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Refined Products
Recap: Oil markets settled lower across the board yesterday, trimming gains made last Friday. NYMEX (WTI) Crude  settled down 42 cents to $101.67. The NYMEX Crude September futures contract is now at a $1.35 premium (backwardation) to its October contract indicating  the current demand for crude needed for U.S. refineries. ICE Brent Crude finished down more, 82 cents to $107.57, as the Brent-WTI spread widened to $5.90. The Brent-WTI spread, in one week's time, has increased 22% as the spread closed at $4.82 just a week ago. It appears as if traders are rebalancing their books to reflect a widening Brent-WTI position.  NYMEX RBOB (Gasoline) moved down 1.61 cents to $2.8492, while NYMEX ULSD (HO) lost 2.78 cents to settle at $2.8879.  As oil markets continue to figure out how to handle pricing of geopolitical issues by sorting out those factors affecting oil supply in Europe and the Middle East, it is offset by robust North American crude production. Because this new dynamic, [North American oil production vs. European and MENA (Middle East and North Africa) violence], we are seeing more pop and drop action.  As  Dow Jones News Plus reported yesterday, "We're seeing the market bounce back and forth like a yo-yo right now because there's a lot of competing forces," said Phil Flynn, analyst at Price Futures Group in Chicago. (7-28-14) 

Currently: In keeping with the drop and pop theme, oil markets are up except for NYMEX (WTI) Crude that is down 88 cents to $100.79. ICE Brent crude is up 8 cents to $107.65, putting the current Brent-WTI spread at $6.86. With the expiration of both the August NYMEX RBOB and USLD futures contracts on Thursday, July 31, it is no wonder we are seeing some additional volatility, or  pop and drop action. Unfortunately, we are popping up: NYMEX ULSD is up 1.57 cents to $2.9036 and NYMEX RBOB is up  1.07 cents to $2.8599.

Speculator "Spec" Watch:
  Net Speculative length increased for NYMEX (WTI) Crude, declined NYMEX RBOB (Gasoline), and declined even further for NYMEX ULSD (HO) reversing to a net short position. According to the CFTC's Commitments of Traders Report released on Friday for reporting through Tuesday, July 22nd, the Money Manager (Speculative) category for NYMEX (WTI) Crude, net speculative length (combined futures and options contracts), increased 7.27% from the previous week of 259,259 contracts to 278,116. NYMEX RBOB net speculative length decreased 22% from 43,702 futures and options contracts to 34,115. Net speculative length for NYMEX ULSD (HO) decreased 117% from 8,784 contracts to net speculative short 1,520 contracts. This is the first time in 2014 that speculators have been net short for NYMEX USLD (HO).  This net short position provides some additional clarity as to why the bears fought to keep pricing from moving higher, as net short investors get paid when the market moves lower, not higher. But it also illustrates that despite the potential downward momentum to be gained by net short speculators, the difficulty of moving below this technical $2.85 point and holding there. As has to be noted, this CFTC data is lagging, and when results are released for the period ending today, July 29th, on Friday, we may see that Friday's 4.48 cent bounce to $2.9157 might have moved some of these speculators out of these short positions, as they would have been losing money as the market went up. Yesterday's NYMEX ULSD settlement at $2.8879, and hitting a low of $2.8694, shows some ability for the bears to move pricing lower; however, was that just an opportunity for bears to move out before the bulls take over?

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Natural Gas

On Monday July 28th, the August NYMEX Natural Gas Futures Contract opened at $3.804 – more than two cents above last Friday’s closing price.  The buying continued during the opening minutes and at 9:20AM, prices hit $3.850 – the intraday high.  But like the last few trading days, this enthusiasm was short lived due to lack of fundamental support.  By 11AM, prices had fallen below their opening range and by noon, August was trading as low as $3.734 – the intraday low.  After a climb to almost $3.78, prices fell and then traded around the $3.76 mark for the rest of the day.  Monday closed at $3.747 – 3.4 cents below Friday’s close.  It is worth noting that the recent slide in prices has convinced many speculators to exit the natural gas futures market.  Per Dow Jones, hedge funds have reduced their net long-positions by 11% during the week ended July 22.  This morning in Globex, WTI Crude was down almost one dollar.  Natural Gas was up slightly.  Both Heating Oil and Gasoline were up two 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.