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

EPA approves Magellan’s Corpus Christi splitter project

12/12/2014 The US Environmental Protection Agency has issued a final greenhouse gas prevention of significant deterioration construction permit to Magellan Pr...

Keyera to take majority interest in Alberta gas plant

12/12/2014 Keyera Corp., Calgary, will pay $65 million (Can.) to buy a 70.79% ownership interest in the Ricinus deep-cut gas plant in west-central Alberta.

PBF Energy, PBF Logistics make management changes

12/12/2014 Matthew Lucey, currently executive vice-president of PBF Energy Inc., will succeed Michael Gayda as the company’s president. Todd O’Malley, current...

TAEP: TPI still peaking, but ‘contraction unavoidable’ as oil prices fall

12/12/2014 The Texas Petro Index (TPI), a composite index based on a comprehensive group of upstream economic indicators released by the Texas Alliance of Ene...

MARKET WATCH: NYMEX crude oil price extends slump

12/12/2014 Crude oil prices extended their slump on the New York market with a Dec. 11 settlement of less than $60/bbl for January, and prices continued downw...

US needs more data before ending crude export ban, House panel told

12/11/2014 Much more environmental impact information is needed before the US can reasonably remove crude oil export limits, a witness told a House Energy and...

BOEM raises offshore oil spill liability limit to $134 million

12/11/2014 The US Bureau of Ocean Energy Management increased the liability limit for oil-spill related damages from offshore operations to $134 million from ...

Rosneft, Essar sign terms of oil supply agreement

12/11/2014 OAO Rosneft and Essar Energy PLC have signed key terms of an oil supply agreement in New Delhi. Rosneft said shipments to India may begin in 2015.

Barton introduces bill to remove US crude export limits


US Rep. Joe Barton (R-Tex.) introduced legislation that would remove US crude oil export limits that have been in place for nearly 40 years.

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts

On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.



Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.


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