Gasoline Contango Reaches Seven-Year High on Ample Winter FuelEliot Caroom
Gasoline’s contango reached the widest in seven years as supplies in the U.S. East Coast increased last week. Heating oil fell the most in two weeks.
March gasoline’s discount to April increased 2.6 cents to 23.64 cents, the biggest spread for the two contracts nearest to expiration since 2006. The larger contango indicates the market around New York Harbor, the Nymex delivery point, is amply supplied with winter-grade fuel to be delivered under the March contract. April futures represent summer-grade gasoline, which is more expensive to refine and blend.
“There’s some good volatility around this because it’s dependent on who has what in their tanks before they switch over to a summer-grade delivered material,” Stephen Schork, the president of Schork Group Inc. in Villanova, Pennsylvania, said by phone.
Gasoline for March delivery dropped 1.49 cents to settle at $3.0354 a gallon on the New York Mercantile Exchange on volume that was 64 percent above the 100-day average. The March gasoline crack spread versus West Texas Intermediate oil narrowed 12 cents to $30.48 a barrel. The spread against Brent narrowed 68 cents to $8.77.
Gasoline stockpiles in the East Coast, or PADD 1 region, jumped 1.7 million barrels to the highest level since March 16, according to Energy Information Administration, the Energy Department’s statistical arm.
Heating oil sank, shrugging off the largest distillate fuel inventory withdrawal since Sept. 28. Supplies declined 3.68 million barrels to 125.9 million, the EIA reported. Heating oil supplies in PADD 1 increased 430,000 barrels.
“A lot of this has already been baked into the prices over the last two days,” Schork said.
March-delivery heating oil slipped 1.74 cents to $3.2188 a gallon. The March contract’s premium over April narrowed 0.46 cent to 1.32 cents.
Gasoline at the pump, averaged nationwide, rose 1.4 cents to $3.618 a gallon, AAA said on its website today. Prices are the highest since Oct. 23, and 10.5 cents above a year ago.