By Brian L. Milne, Refined Fuels Editor, Telvent DTN
Wholesale gasoline prices surged in February, with the futures contract soaring to a high last seen on July 28, 2011, with gasoline demand during the summer months the highest. The gasoline futures contract, called RBOB (Reformulated Blendstock for Oxygenate Blending) and trades on the New York Mercantile Exchange rallied more than 13 cents during the final full week of February, gaining 4.4% in value.
Wholesale costs moved up sharply, with prices in the greater Chicago region climbing well above the futures advance on stronger cash differentials as the region transitions to lower Reid vapor pressure readings in the gasoline now trading in the spot market. Wholesale gasoline costs along the West Coast also outpaced the average advance for the country amid a string of refinery outages impacting regional oil processing.
Already at their highest point this early in a calendar year, retail gasoline prices continue to march higher, with regular grade averaging $3.591 gallon nationally—a five-month high. They will again increase when the Energy Information Administration (EIA) releases it final weekly update for February.
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In addition to worry over lost Iranian oil supply to world markets because of sanctions, and Tehran’s response, saying previously that it would close the Strait of Hormuz, a key shipping lane for oil in the Persian Gulf, analysts are looking at domestic issues, too.
The permanent closure of the Philadelphia area refineries, the prospect for a third refinery in Philadelphia to shut down for good in July, and the shutdown of a refinery in St. Croix that shipped product to the US East Coast have analysts anticipating tighter regional supply that could spike gasoline prices heading into the summer.
“Analysts anticipate the Mid-Atlantic region will be a hot spot for gasoline prices in the coming weeks and months, a ‘crude awakening’ for motorists who continue to endure pain at the pump,” said Tracy Noble, spokesperson for AAA Mid-Atlantic. “The next 60 days will prove extremely volatile for gas prices in the region, following the idling of two Philadelphia area refineries in recent weeks and the threat of another closure this summer. Prices at the pump are likely headed to $4 per gallon in the coming weeks, which does not bode well for motorists who have already had to deal with two months of record setting gas prices to start the year.”
About the Author
Brian L. Milne is the Refined Fuels Editor for Telvent DTN—a leading business-to-business provider of real-time commodity information services. Milne has been focused on the energy industry for 16 years as an analyst, journalist and editor. He can be reached at email@example.com.