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 $1.64 per gallon (gal) on February 4, up 27 cents/gal from January 4 (Figure 4). The RBOB–Brent crack spread (the difference between the price of RBOB and the price of Brent crude oil) increased by 9 cents/gal to settle at 24 cents/gal during the same period.

In the United States, expectations of increased domestic consumption likely contributed to upward pressure on the RBOB–Brent crack spread in January. EIA forecasts gasoline consumption will average 8.5 million barrels per day (b/d) from February to June, compared with consumption in January, which EIA estimates at 7.8 million b/d.

March to April RBOB contract spread: The RBOB futures contract for April delivery is the first contract during the year that trades the more-expensive-to-produce summer-grade gasoline. As a result, April contracts typically trade at a premium to March contracts. On the final trading day in January in the past five years, the average spread between RBOB contracts for April delivery and RBOB contracts for March delivery was 19 cents/gal (Figure 5). In 2021, that spread was 10 cents/gal, the lowest since 2009. The relatively low spread this year likely indicates that expectations of a seasonal increase in spring and summer driving will be more subdued than in previous years. Additionally, the spread may be lower because refinery utilization levels are relatively low, and the marginal cost of increasing summer-grade gasoline production from a low baseline may be lower than under normal utilization rates.

Ultra-low sulfur diesel prices: The front-month futures price for ultra-low sulfur diesel (ULSD) for delivery in New York Harbor settled at $1.70/gal on February 4, up 24 cents/gal from January 4 (Figure 6). The ULSD–Brent crack spread (the difference between the price of ULSD and the price of Brent crude oil) increased by 5 cents/gal to settle at 30 cents/gal during the same period. January’s average ULSD–Brent crack spread of 26 cents/gal was the highest since March 2020.

The ULSD-Brent crack spread generally increased throughout January and has continued to increase in early February. Higher estimated consumption in January likely contributed upward pressure to the crack spread, which has increased for four consecutive months. EIA estimates distillate consumption increased 0.36 million b/d (10%) from December to 4.01 million b/d in January. Because of the wide price spread between ULSD traded at New York Harbor and low sulfur gasoil traded in Europe, U.S. net imports have been relatively high, contributing to a stock build of 3.9 million barrels (2.5%) in January. If confirmed by monthly data, January net imports were the highest for that month since 2011, and the January 2021 closing stock level was the highest for the month since 2017.