Release date: February 26, 2020 | Next release date: March 4, 2020
After January weakness, gasoline crack spreads increase in February
U.S. Gulf Coast gasoline crack spreads (the difference between wholesale gasoline prices and crude oil prices that is often used to estimate refining margins) for January 2020 were relatively small compared with the previous five-year (2015–19) average, but they increased in February and as of February 25 are now wider than the five-year average (Figure 1). In January, weak gasoline demand (as measured by product supplied), high gasoline inventories, and high refinery runs all contributed to the narrow gasoline crack spreads. In February, refinery outages, increased gasoline demand, and flat West Texas Intermediate (WTI) crude oil prices contributed to the growing Gulf Coast crack spreads.
U.S. Gulf Coast gasoline crack spreads averaged 18 cents per gallon (gal) in January, compared with a five-year average of 22 cents/gal. Since 2010, only the crack spreads in 2015 and 2019 were smaller, when they averaged 12 cents/gal.
Although refinery runs are sensitive to gasoline cracks, distillate crack spreads are typically more important to overall refinery margins during the winter months, and refineries make a number of products that each have a respective margin. So, high U.S. refinery runs combined with seasonally low domestic gasoline consumption contributed to high inventories, putting downward pressure on gasoline prices in January. Refinery runs in the U.S. Gulf Coast (home to more than 50% of U.S. refining capacity) have been near or above the top of the five-year range each week in 2020. For the week ending January 31, the four-week average refinery gross inputs for the U.S. Gulf Coast was 9.2 million barrels per day (b/d), 75,000 b/d more than the same week last year. U.S. consumption, as measured by product supplied, dropped to 8.5 million b/d (four-week rolling average) for the week ending January 24, the lowest level of consumption since February 2017.
Weak gasoline consumption and strong refinery runs led to record-high gasoline inventories in early 2020. On January 24, 2020, weekly gasoline inventories reached 95.8 million barrels in the Gulf Coast (Petroleum Administration for Defense Districts, or PADD, 3) and 261.2 million barrels for the United States in total, both record highs (Figure 2).
However, refinery outages at the Phillips 66 Bayway refinery in New Jersey on February 6 and at the Exxon Baton Rouge refinery in Louisiana on February 12 have contributed to tightness in the gasoline market in February, leading to rising gasoline prices. In addition, gasoline demand has also increased; product supplied in the United States reached 9.0 million b/d the week ending February 14—498,000 b/d more than the recent low on January 24—putting additional upward pressure on gasoline prices.
The New York Harbor RBOB (reformulated blendstock for oxygenate blending) price increased from $1.47/gal on February 5 (the day before the Bayway refinery outage) to $1.66/gal on February 19, and the price of Gulf Coast gasoline (Gulf Coast Conventional 87) increased from $1.42/gal to $1.62/gal during the same period. Although Gulf Coast gasoline prices increased by 15 cents/gal between February 5 and February 25, the WTI crude oil price only increased by 6 cents/gal during the same period, leading to rising crack spreads on the U.S. Gulf Coast. As of February 25, the average gasoline crack spread in the U.S. Gulf Coast was 38 cents/gal, up 20 cents/gal from the January average and up 12 cents/gal from the five-year average.
Other markets have seen similar trends in gasoline crack spreads. Gasoline crack spreads in the Amsterdam-Rotterdam-Antwerp (ARA) region of Northern Europe and in Singapore were also relatively weak in January, but they have both increased relative to their five-year averages in more recent weeks. In ARA, January crack spreads of 8 cents/gal were the second-narrowest for that month since 2014. In Singapore, crack spreads of 13 cents/gal were the second-lowest since at least 2011.
Crack spreads in ARA in January averaged more than 6 cents/gal below the previous five-year average but increased in February and were equal to the five-year average as of February 25 (Figure 3). Crack spreads in ARA use the price of Brent crude oil, which fell by 10 cents/gal from the January average as of February 25. During the same period, gasoline prices in Europe (ARA EuroBOB 85) fell by only 4 cents/gal.
Crack spreads in Singapore were 14 cents/gal as of February 25, an increase of 1 cent/gal over the January crack spread (Figure 4). Gasoline prices in Singapore have averaged $1.46/gal so far in February, which is down by 20 cents/gal from January. The price for Dubai crude oil (the regional benchmark used for calculating crack spreads) averaged 22 cents/gal lower on February 25 compared with the January average, providing some upward pressure on crack spreads in Singapore. Because of its proximity to China, gasoline and crude oil prices in Singapore are likely more affected by demand concerns stemming from the 2019 novel coronavirus (COVID-19) than prices in Europe or the United States. Decreasing refinery runs in China, as reported by trade press articles, are likely putting downward price pressure on crude oil, offsetting the effects of crack spreads of falling gasoline prices. The effects of COVID–19 on petroleum markets is uncertain and continues to evolve.
U.S. average regular gasoline prices rise, diesel prices decline
The U.S. average regular gasoline retail price increased nearly 4 cents from the previous week to $2.47 per gallon on February 24, 8 cents higher than the same time last year. The Gulf Coast price rose nearly 7 cents to $2.15 per gallon, the Midwest price increased nearly 5 cents to $2.36 per gallon, the East Coast price rose nearly 4 cents to $2.40 per gallon, and the West Coast price rose less than 1 cent, remaining at $3.14 per gallon. The Rocky Mountain price fell more than 3 cents to $2.44 per gallon.
The U.S. average diesel fuel price fell nearly 1 cent from the previous week to $2.88 per gallon on February 24, 17 cents lower than a year ago. The West Coast, East Coast, and Rocky Mountain prices each fell nearly 1 cent to $3.46 per gallon, $2.93 per gallon, and $2.85 per gallon, a respectively, and the Gulf Coast and Midwest prices each declined less than 1 cent to $2.65 per gallon and $2.76 per gallon, respectively.
Propane/propylene inventories decline
U.S. propane/propylene stocks decreased by 0.7 million barrels last week to 73.6 million barrels as of February 21, 2020, 19.3 million barrels (35.5%) greater than the five-year (2015-19) average inventory levels for this same time of year. Midwest inventories decreased by 1.0 million barrels. East Coast inventories increased by 0.2 million barrels, and Gulf Coast and Rocky Mountain/West inventories each increased by 0.1 million barrels. Propylene non-fuel-use inventories represented 7.4% of total propane/propylene inventories.
Residential heating fuel prices decrease
As of February 24, 2020, residential heating oil prices averaged almost $2.90 per gallon, less than 1 cent per gallon below last week’s price and more than 33 cents per gallon lower than last year’s price at this time. Wholesale heating oil prices averaged nearly $1.79 per gallon, more than 1 cent per gallon below last week’s price and more than 36 cents per gallon lower than a year ago.
Residential propane prices averaged almost $1.98 per gallon, less than 1 cent per gallon below last week’s price and more than 45 cents per gallon below last year’s price. Wholesale propane prices averaged nearly $0.60 per gallon, almost 4 cents per gallon higher than last week’s price but almost 28 cents per gallon below last year’s price.
For questions about This Week in Petroleum, contact the Petroleum Markets Team at 202-586-4522.
Retail prices (dollars per gallon)
| Retail prices | Change from last | ||
|---|---|---|---|
| 02/24/20 | Week | Year | |
| Gasoline | 2.466 | 0.038 | 0.076 |
| Diesel | 2.882 | -0.008 | -0.166 |
| Heating Oil | 2.896 | -0.003 | -0.334 |
| Propane | 1.977 | -0.004 | -0.453 |
Futures prices (dollars per gallon*)
| Futures prices | Change from last | ||
|---|---|---|---|
| 02/21/20 | Week | Year | |
| Crude oil | 53.38 | 1.33 | -3.88 |
| Gasoline | 1.651 | 0.068 | 0.040 |
| Heating oil | 1.687 | -0.011 | -0.344 |
| *Note: Crude oil price in dollars per barrel. | |||
Stocks (million barrels)
| Stocks | Change from last | ||
|---|---|---|---|
| 02/21/20 | Week | Year | |
| Crude oil | 443.3 | 0.5 | -2.5 |
| Gasoline | 256.4 | -2.7 | 1.4 |
| Distillate | 138.5 | -2.1 | 0.1 |
| Propane | 73.572 | -0.688 | 20.162 |