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Short-Term Energy Outlook

Release Date: October 6, 2020  |  Next Release Date: November 10, 2020  |  Full Report    |   Text Only   |   All Tables   |   All Figures

Petroleum Products

Gasoline prices: The front-month futures price of reformulated blendstock for oxygenate blending (RBOB, the petroleum component of gasoline used in many parts of the country) settled at $1.15 per gallon (gal) on October 1, down 7 cents/gal from September 1, 2020 (Figure 5). The RBOB–Brent crack spread (the difference between the price of RBOB and the price of Brent crude oil) increased by 4 cents/gal to settle at 18 cents/gal during the same period. The average crack spread in September decreased from 20 cents/gal in August to average 18 cents/gal.

Figure 5: Historical RBOB front-month futures prices and crack spread

The transition to winter-grade gasoline and a decrease in gasoline consumption likely contributed to the decrease in the average crack spread from August. EIA estimates U.S. gasoline consumption totaled 8.5 million barrels per day (b/d) in September, down 0.3 million b/d from August, and if confirmed in monthly data, it would be the lowest level for September since 1999. Nonetheless, the average crack spread came within the month’s five-year (2015–19) range for the first time since January 2020 as U.S. total motor gasoline stocks declined by 3.9 million barrels from August, the largest September draw since 2008, when Hurricanes Gustav and Ike made landfall in the Gulf Coast. Lost gasoline production because of storm-related refinery closures contributed to this stock decrease. According to trade press, Citgo's 418,000 b/d Lake Charles refinery and Phillips 66's 260,000 b/d Westlake plant are expected to remain shut through at least mid-October after closing from Hurricane Laura in late-August, and Phillips 66’s 255,600 b/d Alliance refinery, which was already scheduled for maintenance in October, has been shut since taking precautions for Hurricane Sally beginning on September 13.

Ultra-low sulfur diesel prices: The ultra-low sulfur diesel (ULSD) front-month futures price for delivery in New York Harbor settled at $1.13/gal on October 1, 2020, down 11 cents/gal from September 1, 2020 (Figure 6). The ULSD–Brent crack spread (the difference between the price of ULSD and the price of Brent crude oil) remained mostly unchanged at 15 cents/gal during the same period.

Figure 6: Historical ULSD front-month futures price and crack spread

The ULSD–Brent crack spread, which has averaged less than the five-year minimum in each of the past five months, was 27 cents/gal lower than the five-year average for September. Crack spreads decreased as consumption decreased and inventories remained high. EIA estimates that distillate consumption was 3.6 million b/d for September, down 5% from August’s estimate of 3.7 million b/d and down 9% from a year ago. EIA also estimates that distillate production decreased in September, falling to 4.4 million b/d, the lowest for any month since March 2013. Despite lower month-over-month production, distillate yields for much of 2020 have remained higher than the 2019 level. Although distillate demand has declined this year, jet fuel demand has declined by more. As a result, refiners have shifted production away from jet fuel and toward distillate, which has contributed to persistently high distillate fuel inventories and low distillate fuel crack spreads.

August and September crack spreads: The RBOB–Brent crack spread typically decreases from August to September because futures contracts switch to the cheaper winter-grade gasoline and consumption decreases as the summer driving months come to an end. This year, the crack spread decreased less than in previous years (Figure 7). Whereas the crack spread decreased in 2018 and 2019 by 17 cents/gal and 13 cents/gal, respectively, the crack spread only decreased by 2 cents/gal this year. The shallower decline this year likely reflects that the crack spread stayed at a lower level this summer because of lower gasoline demand as a result of more people working from home.

Figure 7: August and September average crack spreads

Unlike the RBOB–Brent crack spread, which typically decreases going into the fall, the ULSD–Brent crack spread typically increases. During the previous four years, the ULSD–Brent crack spread increased by an average of more than 2 cents/gal. In 2020, the crack spread decreased by 4 cents/gal, the largest August-to-September decrease in at least 10 years. The average crack spread for both months were at 10-year lows. As a result of gasoline’s relative price premium over distillate, refiners have accordingly been reconfiguring equipment to favor gasoline over middle distillates, according to trade press.

U.S. Petroleum and Other Liquids
  2018201920202021
Crude Oil prices (dollars per barrel)
WTI Spot Average 65.0756.9938.7644.72
Brent Spot Average 71.2164.3441.1947.07
Imported Average 61.3457.9536.8642.07
Refiner Average Acquisition Cost 64.4859.3640.2243.14
Retail prices including taxes (dollars per gallon)
Regular Gasoline 2.732.602.152.23
Diesel Fuel 3.183.062.542.55
Heating Oil 3.013.002.442.46
Production (million barrels per day)
Crude Oil 10.9612.2511.4511.09
Natural Gas Plant Liquids 4.374.825.045.21
Fuel Ethanol 1.051.030.900.99
Biodiesel 0.1210.1120.1130.134
Consumption (million barrels per day)
Motor Gasoline 9.339.318.228.97
Distillate Fuel Oil 4.154.103.753.96
Hydrocarbon Gas Liquids 3.013.143.103.35
Jet Fuel 1.711.741.081.54
Total Consumption 20.5120.5418.2319.97
Primary Assumptions (percent change from previous year)
U.S. Real GDP Growth 3.02.2-4.13.5
Heating Degree Days 11.80.6-6.82.9
Distillate-weighted Industrial Production 2.5-0.2-6.22.4

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