By Brian L. Milne, Refined Fuels Editor, Telvent DTN
Wholesale gasoline costs were mixed countrywide in moving into the second half of August, with some markets, notably the greater Chicago market in the upper Midwest, posting steeply lower values after a surge in those prices in late July early August.
Wholesale costs in the broad Chicago spot market, which effects pricing throughout the upper Midwest, came under heavy selling pressures as unexpectedly shut refinery units were returned to service, easing the availability of supply in the product short market.
Wholesale gasoline costs had moved higher through much of the country this summer on a spat of unexpected refinery outages and an increase in demand in August that tightened the supply-demand balance, although overall demand for the transportation fuel remains below the year-ago and fiver-year average rates.
Gasoline prices were also pushed higher by an improving market sentiment for the U.S. economic recovery and a heightening geopolitical risk premium in global oil prices amid the standoff with Iran over its pursuit of a nuclear capability and an expanding civil war in Syria.
View Telvent DTN’s Weekly and Historical Gasoline Price Index.
On the trading side, noncommercial accounts also known as speculators since they are not buying a futures contract to hedge an underlying physical position, increased their net-long position in New York Mercantile Exchange RBOB (gasoline) futures in August to a 2-1/2 month high data from the Commodity Futures Trading Commission shows. A net-long position is one in which the holder of the contract expects its value to increase over time.
NYMEX RBOB futures reached a 3-1/2 month high on its spot continuation chart on Aug. 16, with that price advance still working its way through the supply chain. Spot markets trade gasoline in cash differentials against the futures contract.
Analysts suggest this strong interest for the RBOB contract will wane as we move closer to the Labor Day holiday. US driving demand typically peaks in the summer during the vacation season, and eases after Labor Day.
The Energy Information Administration’s national retail price average for all formulations of regular gasoline increased for sixth consecutive weeks from July 2 through Aug. 13, climbing 36.5cts or 11% to $3.721 gallon. That’s a three-month high, with the 2012 high in the average so far reached on April 2 at $3.941 gallon.
About the Author
Brian L. Milne is the Refined Fuels Editor for Telvent DTN—a leading business-to-business provider of real-time commodity information services. Milne has been focused on the energy industry for 16 years as an analyst, journalist and editor. He can be reached at b[email protected]