Refined Product Futures Cling to Small Increases


Refined product futures initially experienced gains but have since retreated and are currently holding onto small increases at midday on Tuesday. Crude contracts have also pulled back. Despite this, trading activity remains robust, as evidenced by volume estimates. Traders are currently in a consolidation phase as they digest the voluntary production cuts implemented by OPEC+ members last week.

In recent trading sessions, there has been a slight contango developing in the West Texas Intermediate (WTI) contract for the first quarter. This suggests that supplies are currently comfortable. Brent also displays a similar structure, indicating a growing contango.

Looking specifically at the WTI contango through May, the contract is priced at approximately a 50 cent premium to the NYMEX January WTI contract. The January contract surged to a morning high of $74.10 per barrel but saw more moderate gains by midday. So far on Tuesday, WTI has traded within a $2 range and is up slightly over 50 cents, standing at $73.56 per barrel as of 11:50 a.m. ET.

In a similar fashion, February Brent has relinquished most of its earlier gains exceeding one dollar. By midday, February Brent was only 31 cents higher at $78.34 per barrel, while March remained roughly on par with February.

The significant difference of nearly $5 between Brent and WTI prices is expected to continue supporting U.S. crude exports. Trade sources indicate that they anticipate Wednesday’s oil export data from the Energy Information Administration to reach record levels.

Gasoline and Distillate Futures Show Muted Movement

Gasoline and distillate futures exhibited little change during the midday session, despite earlier gains. The NYMEX January RBOB contract initially reached a high of $2.1662, but subsequently retreated to $2.1324/gal just before noon, experiencing a modest decline of 0.18 cent. While paper declines have affected the spot markets in the East of the Rockies, the West Coast markets, particularly Los Angeles, have witnessed significant increases. Cash gasoline prices in Los Angeles are nearly 10 cents higher due to widened premiums compared to the screen, following reports of flaring at Marathon Petroleum’s Los Angeles refiner.

Similarly, the NYMEX January ULSD contract also experienced a retreat from its early gains and maintained a mostly steady position at $2.6602/gal by midday.

It is worth noting that diesel produced by Gulf Coast refineries is offering competitive pricing, with a discount of around 30 cents in relation to the front-month ULSD contract. Prompt Gulf Coast diesel was observed to be priced approximately 34 cents/gal lower than New York Harbor quotes. Additionally, the cost of line space on Colonial’s distillate line remains at a rate of 13.5 cents over tariffs.

— Reporting by Denton Cinquegrana; Editing by Jeff Barber

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