Gasoline Futures Surge on Tight Spot Market

As the driving season arrives, a combination of refinery troubles, labor issues, and inventory concerns has driven gasoline futures to a two-month high. The June contract on the New York Mercantile Exchange (Nymex) has risen 0.46 cents to 66.76 cents, with traders expecting prices to continue to climb. The tight spot market is being fueled by modest imports, reduced production at Gulf Coast refineries, and limited exports due to Brazil's labor strife.

Key Takeaways:

• The June gasoline contract has risen 0.46 cents to 66.76 cents on the Nymex, with traders expecting prices to potentially reach 70 cents or higher.
• Gasoline inventories are 11.9 million bbl below year-earlier levels, with stocks rising modestly last week.
• Refinery troubles, including issues at Gulf Coast refineries, have reduced production and contributed to the tight spot market.
• Labor issues in Brazil have limited exports, exacerbating the supply shortage.
• The steeper backwardation in gasoline has seen the June contract trade 3.35 cents above July and 5.71 cents above August.
• Traders are starting to see "June-July rolls," with players closing out their first-month contracts.

Statistics:

• June gasoline contract: +0.46 cents to 66.76 cents
• Inventory levels: 11.9 million bbl below year-earlier levels
• Production at Gulf Coast refineries: reduced due to troubles and labor issues
• Exports: limited by Brazil's labor strife
• Backwardation: June contract 3.35 cents above July and 5.71 cents above August
• Crude oil price: $19.96/bbl (June Nymex contract)
• Prices for specific crudes: Light Louisiana Sweet +25 cents above Nymex, Alaska North Slope $1.10 below Nymex, San Joaquin Valley-Kern River heavy crudes above $15.35/bbl

Sources:

• "Oil Falls as Inventories Rise, with Some Bearish Observations on Supplies"
• Specialist at the New York Mercantile Exchange (Nymex)