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 $2.02 per gallon (gal) on May 2, 2019, an increase of 12 cents/gal since April 1 (Figure 5). The RBOB–Brent crack spread (the difference between the price of RBOB and the price of Brent crude oil) increased by 8 cents/gal to settle at 33 cents/gal during the same period.

The RBOB–Brent crack spread averaged 33 cents/gal in April, the lowest for April since 2010. However, the average crack spread increased by seven cents/gal from March, more than the five-year (2014–18) average increase of one cent/gal for this time period. The higher-than-normal increase signals that the RBOB crack spread may be returning to average seasonal levels after a record-low first quarter of 2019. EIA estimates that U.S. gasoline consumption averaged 9.35 million barrels per day (b/d) in April, an increase of 0.16 million b/d from the same period last year. In addition, April gasoline stocks ended 8.1 million barrels lower than the five-year average for that month, declining for the third consecutive month after ending January 2019 at 261.3 million barrels, which was 11.2 million barrels higher than the five-year average for that month.

Historically low gasoline crack spreads have recovered less quickly in other regions of the world. The Northwest Europe gasoline–Brent spot price crack spread averaged 14 cents/gal in April. Each month in 2019 has been the lowest crack spread for that month since at least 2011 (Figure 6). The Singapore gasoline–Dubai/Oman spot price crack spread also averaged 14 cents/gal in April, the lowest since at least 2011 and 10 cents/gal less than the five-year average for the month.

Light distillate stocks (which include gasoline) in Singapore have declined since reaching record inventory levels in February, yet remain higher than the five-year average. Gasoline stocks in the Amsterdam-Rotterdam-Antwerp trade hub in Europe were below the five-year average in April, after remaining above the five-year range for the first two months. Economic indicators signaling slower economic growth in the region could have contributed to lower consumption levels and slower stock draws. In addition, trade press indicates that low water levels on the Rhine River in Germany slowed the transport of gasoline from storage hubs to regional distribution centers in late April. Previously high gasoline inventories in Europe may be tempered in the coming weeks by the potential for increased exports to the United States, as U.S. gasoline consumption reaches its seasonal high and if shippers take advantage of the opportunity to sell European gasoline at higher prices in the United States.

Ultra-low sulfur diesel prices: The ultra-low sulfur diesel (ULSD) front-month futures price increased 9 cents/gal from April 1 to settle at $2.08/gal on May 2. The ULSD–Brent crack spread (the difference between the price of ULSD and the price of Brent crude oil) increased by 5 cent/gal to settle at 39 cents/gal during the same period (Figure 7).

EIA estimates that U.S. distillate consumption—measured as product supplied—was 3.93 million b/d in April, a decrease of 0.18 million b/d from March 2019 and a decrease of 0.22 million b/d from April 2018, which possibly contributed to lower distillate crack spreads. U.S. distillate stocks in April ended 5.1 million barrels higher than in April 2018 but still 9.7 million barrels lower than the five-year average. Initial estimates for distillate exports indicate exports averaged 1.45 million b/d for the four weeks ending April 26, 2019, which if confirmed in the monthly data, would be close to the record high for the month of April set last year.

The monthly average ULSD front-month futures price had remained at a premium to RBOB front-month futures prices since April 2018, but narrowed during April 2019. The daily ULSD front-month futures price began trading at a discount to RBOB front-month futures prices beginning on April 18, 2019, for the first time since July 27, 2018 (Figure 8). Gasoline prices generally start trading at a premium to ULSD prices in March, when the RBOB futures contract represents the more expensive summer grade of gasoline. Historically low gasoline prices during the winter had delayed this seasonal pattern, however, as prices had to recover a greater differential to ULSD.

Money manager positions: Futures and options positions held by money managers for RBOB and ULSD contracts have moved in opposite directions since the beginning of March. The money manager category of the Commitments of Traders report, published weekly by the Commodity Futures Trading Commission, includes fund managers that conduct organized futures trading on behalf of clients, and they are not involved in physical oil trading as their business activity. The ULSD money manager positions were briefly net short in April, whereas net long positions for RBOB significantly increased (Figure 9). The movements in money manager positions reflect recent price changes noted above, where ULSD futures prices, which had been at a substantial premium to RBOB futures prices for several months, briefly fell below RBOB prices in late April.