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 $1.55 per gallon (gal) on September 5, down 20 cents/gal since August 1 (Figure 6). The RBOB–Brent crack spread (the difference between the price of RBOB and the price of Brent crude oil) decreased by 21 cents/gal to settle at 9 cents/gal during the same period.
The crack spread declined throughout August and then fell further at the beginning of September, when the front-month contract rolled to October delivery, which reflects winter grade gasoline that is cheaper for refineries to produce. The August monthly average gasoline crack spread declined to lower than the five-year (2014–18) range after increasing to the five-year average in July for the first time this year. U.S. gasoline inventories decreased in August despite what EIA estimates would be record high gasoline production if confirmed by monthly data. In addition, gasoline imports into the East Coast increased after the Philadelphia Energy Solutions refinery closed in June, reaching 0.8 million barrels per day (b/d) for the four weeks ending August 30, 22% higher than the five-year average.
Butane prices: In each of the past three months, butane spot prices averaged 49 cents/gal (Figure 7), the lowest monthly average prices in 17 years. U.S. butane inventories in May 2019 (the latest data available) reached 48 million barrels, 12 million barrels higher than the five-year average. Butane produced through natural gas processing was 418,000 b/d in April and May 2019, the highest level ever recorded. Lower prices have provided incentives to export butane as well as input more butane into refinery processing. In April, the United States exported 331,000 b/d of butane, the highest amount ever. In November and December 2018, butane refinery inputs of 363,000 b/d were also the highest on record. Blending butane into gasoline is one of its major uses. During the summer months, however, the amount that can be blended is limited by lower vapor pressure specifications. The limited refinery use contributed to the rising inventory levels and low prices during this past summer.
Ultra-low sulfur diesel prices: The ultra-low sulfur diesel (ULSD) front-month futures price increased 4 cents/gal from August 1 to settle at $1.89/gal on September 5. The ULSD–Brent crack spread (the difference between the price of ULSD and the price of Brent crude oil) increased 2 cents/gal to settle at 44 cents/gal during the same period (Figure 8).
ULSD prices remained higher than RBOB from May to August for the second consecutive year. Even though distillate consumption declined in August to below the five-year range, exports increased and production declined, helping to keep inventories lower than the five-year average. Distillate exports increased to 1.5 million b/d for the four weeks ending August 30, which, if confirmed by monthly data, would be the highest monthly amount in 2019 and the third-largest on record. EIA estimates that production declined in August compared with July 2019. The production decline was also the largest year-on-year decrease since September 2017. EIA estimates that distillate inventories ended August 11 million barrels lower than the five-year average.
