MARKET WATCH: RBOB spikes as traders cover short positions

October reformulated stock for oxygenate blending jumped 19.77¢ to finish at $3.34/gal—the highest level since early April—as traders scrambled to cover short positions prior to expiration of that contract at the close of the Sept. 28 session on the New York market.

In an amazing move, the contract soared nearly 30¢/gal near the end of the session. The exact cause of the sudden spike was unclear, but there was speculation of delayed gasoline deliveries in New York harbor, the specified point for physical deliveries. Gasoline stocks are reported to be low on the Atlantic Coast, while some refineries are in seasonal turnaround. However, the November RBOB contract gained only 2.29¢ to $2.92/gal in the same session. Heating oil for October delivery rose 1.21¢ to $3.17/gal.

The front-month US crude contract continued to advance for the second consecutive session but posted a 1% net loss for the week, “building on downward momentum from the previous week, said analysts in the Houston office of Raymond James & Associates Inc. Natural gas “inexplicably gained 8% despite bearish inventory data and a lack of needle-moving news (war of the machines?),” they reported.

“Stepping back a bit, although the past 2 weeks have ended in negative territory, broader markets have still posted a gain of 5% in the third quarter,” said Raymond James analysts. “As investors come to grips with the fact that the quantitative easing bump has come and gone, they will now look for positive language from (US Reserve Bank Chairman Ben) Bernanke later today and possibly start looking forward to the upcoming earnings season.”

Meanwhile, the front-month Brent crude contract continues to trade around its 200-day moving average. “Brent fell all the way to $107/bbl last week but managed to claw its way back to current levels around $112.10/bbl,” said Walter de Wet at Standard New York Securities Inc., the Standard Bank Group. “In contrast, the West Texas Intermediate front-month contract fell below its 200-day moving average (at $96.23/bbl) last week but failed to bounce back and is currently trading around $92.10/bbl.”

This, he said, is reflective of a Brent market that remains tighter than the WTI market. “This is also reflected in the forward curve for Brent, which remains in fairly steep backwardation as opposed to the WTI forward curve, which remains in contango out to June 2013. But the Brent crude price action is also a function of the crack spreads that remain at high levels incentivizing refineries to produce more products and demand more crude. While the US crack spreads have been elevated for some time now (except for a sharp drop in November last year), Asian crack spreads have now also edged higher since mid-June.”

Nevertheless, US inventory remains high, putting a drag on WTI prices. “After a summer of strong drawdowns of crude oil and product inventory on the back of the seasonal increase in US gasoline demand (driving season), crude oil inventories have once again started to climb overall,” De Wet reported.

In its latest inventory report for the week ended Sept. 21, the Energy Information Administration said commercial US crude stocks dropped 2.4 million bbl to 365.2 million bbl, yet remained above the 5-year average for the time of year. “In terms of days of supply, we have also seen a significant breach of the 5-year upper limit,” said De Wet. “We have never viewed this as a reason to get overtly bearish on oil. Instead, we have cautioned that we would not get too excited about the potential for US crude inventory draws to push WTI prices significantly higher.”

He noted the strongest liquidation “since early May” last week in net speculative length on WTI in the New York market “driven by decidedly bearish underlying moves.” De West said, “This decline coincided with the news that Saudi Arabia was consulting with refiners, having stepped up its supply of crude oil and would increase it further should demand conditions warrant it.” A similar move by Saudi Arabia in March provided the catalyst for a 3-month downward trend in crude oil prices,” he said.

Bakken oil

In other news, Raymond James analysts said, “The Bakken oil play has become the poster-child for US oil shale growth in recent years. In hand with this remarkable growth curve have come all the typical growing pains of being a land-locked crude—namely, having to succumb to pricing at a transportation differential to an already heavily discounted Cushing, Okla., based WTI price. Not surprisingly, with the storage glut still brimming at Cushing (and likely to be fully alleviated until the second half of 2013), Bakken producers have recently sought out higher-priced coastal markets (via rail) in order to bypass Cushing (and the cheaper WTI benchmark).”

They said many investors don't realize Bakken oil traded at a premium to WTI through most of September. That, they said, is “a clear indication that railroad takeaway capacity out of the Bakken play has reached an effective scale to clear out the Bakken regional oversupply, even during times of refinery turnarounds. Moreover, we would pose that Bakken prices have now actually disconnected from Cushing (and WTI prices) altogether and are now finding a price point that reflects the rail transportation cost all the way to the coastal markets (Light Louisiana Sweet or Brent). In our view, this supports a more sustainable Bakken-to-LLS/Brent differential of $12-20/bbl, a substantial improvement from the $40-plus/bbl differentials that Bakken barrels were receiving earlier this year.”

Energy prices

The November contract for benchmark US light, sweet crudes increased 34¢ to 92.19/bbl Sept. 28 on the New York Mercantile Exchange. The December contract advanced 35¢ to $92.56/bbl. On the US spot market, WTI at Cushing was up 34¢ to $92.19/bbl.

The November natural gas contract rose 2.3¢ to $3.32.MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., escalated 7.3¢ to $3.05/MMbtu.

In London, the November IPE contract for North Sea Brent increased 38¢ to $112.39/bbl. Gas oil for October dipped 25¢ to $980.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes increased $1.47 to $109.68/bbl. So far this year, OPEC’s basket price has averaged $110.18/bbl.

Contact Sam Fletcher at

Related Articles

Congressional Republicans renew bid to halt sue-and-settle maneuvers

02/05/2015 Calling it an affront to regulatory accountability that results in unchecked compliance burdens, US Sen. Charles E. Grassley (R-Iowa) and US Rep. D...

Oil-price collapse may aggravate producing nations’ other problems

02/05/2015 The recent global crude-oil price plunge could be aggravating underlying problems in Mexico, Colombia, and other Western Hemisphere producing natio...

Goodlatte reintroduces bills to repeal, reform RFS

02/05/2015 Calling it “a true ‘kitchen table’ issue,” US Rep. Bob Goodlatte (R-Va.) reintroduced a pair of bills to address problems in the federal Renewable ...

MARKET WATCH: NYMEX oil drops, ending 4-day rally

02/05/2015 Crude oil prices dropped on the New York market Feb. 4 to settle below $50/bbl and to end a 4-day rally after a weekly government report showed oil...

Alberta’s premier seeks more North American energy integration

02/05/2015 Better policy integration and cooperation will be needed for Canada, Mexico, and the US to fully realize the North American energy renaissance’s po...

Deloitte studies oil supply growth for 2015-16

02/04/2015 A Deloitte MarketPoint analysis suggested large-field projects, each producing more than 25,000 b/d, could bring on 1.835 million b/d in oil supply...

Oil, gas infrastructure investments essential, House panel told

02/04/2015 Investments in oil and gas transportation and storage should move ahead because they are essential in continuing the US economic recovery and North...

Petrobras CEO, five other senior executives resign

02/04/2015 Maria das Gracas Foster, chief executive officer of Petroleo Brasileiro SA (Petrobras) since 2012, has resigned along with five other senior execut...

MARKET WATCH: NYMEX crude oil prices reach 2015 high

02/04/2015 Crude oil prices surged more than $3/bbl on the New York market Feb. 3, closing at the highest level so far this year, but some analysts believe th...
White Papers

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...

Accurate Thermo-Fluid Simulation in Real Time Environments

The crux of any task undertaken in System Level Thermo-Fluid Analysis is striking a balance between ti...

6 ways for Energy, Chemical and Oil and Gas Companies to Avert the Impending Workforce Crisis

As many as half of the skilled workers in energy, chemical and oil & gas industries are quickly he...
Sponsored by
Available Webcasts

On Demand

Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.


The Future of US Refining

Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.


Oil & Gas Journal’s Forecast & Review/Worldwide Pipeline Construction 2015

Fri, Jan 30, 2015

The  Forecast & Review/Worldwide Pipeline Construction 2015 Webcast will address Oil & Gas Journal’s outlooks for the oil market and pipeline construction in a year of turbulence. Based on two annual special reports, the webcast will be presented by OGJ Editor Bob Tippee and OGJ Managing Editor-Technology Chris Smith.
The Forecast & Review portion of the webcast will identify forces underlying the collapse in crude oil prices and assess prospects for changes essential to recovery—all in the context of geopolitical pressures buffeting the market.


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!


Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected