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Petroleum industry

EPA Denies Wisconsin's Request to Postpone Reformulated Gasoline Program, Boosting Fuel Traders

Strategic Insights

— 1 min read

The Environmental Protection Agency's (EPA) decision to deny Wisconsin's request to postpone the implementation of the reformulated gasoline (RFG) program has led to a surge in gasoline trading. Despite the initial optimism, traders liquidated long positions ahead of the March contract's expiration, causing gasoline futures to falter. However, the market remains neutral to bullish over the next few months due to inadequate RFG stocks, particularly in the Northeast, as the driving season approaches.

Key Takeaways:

  • The EPA's denial of Wisconsin's request to postpone the RFG program has encouraged trading in reformulated gasoline.
  • Gasoline futures for March delivery rose 0.21 cents to 58.97 cents per gallon, while April futures increased by 0.13 cents to 59.29 cents.
  • Crude oil, natural gas, and heating oil futures all lost ground in trading, with crude oil futures ending the day slightly lower and near-month heating oil and natural gas futures slipping on bearish fundamentals.
  • Analysts had factored the government's denial of Wisconsin's request into their assumptions, suggesting that traders had already anticipated the outcome.
  • The market remains neutral to bullish over the next few months due to inadequate RFG stocks, particularly in the Northeast, as the driving season approaches.
  • A broker noted that above 60 cents per gallon, gasoline futures would see buying interest and potentially increase once it breaks 60.5 cents.
  • The spread between Brent crude and April Nymex crude was a tight 96, considered an unprofitable margin for trans-Atlantic crude arbitrage.
  • March heating oil fell 0.56 to 47.19/gallon, while April heating oil dropped 0.46 to 47.39/gallon, due to the weak winter heating season.
  • April natural gas dropped 3.9 to $1.43/MMBtu, wiping out more than half of last week's 7-cent rally, with April remaining in a sharp contango with later-month futures.

Statistics:

  • Gasoline futures for March delivery rose 0.21 cents to 58.97 cents per gallon.
  • April gasoline futures increased by 0.13 cents to 59.29 cents.
  • Crude oil futures ended the day slightly lower.
  • Near-month heating oil futures fell by 0.56 to 47.19/gallon.
  • April natural gas dropped 3.9 to $1.43/MMBtu.
  • April remained in a sharp contango with later-month futures.

Sources:

  • Environmental Protection Agency (EPA)
  • New York Mercantile Exchange (Nymex)
  • Bloomberg
  • Reuters

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