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Petroleum industry

Maryland's Decision to Opt Out of Winter Oxygenated Fuels Program Affects Gasoline Prices and Crude Oil Contracts

Strategic Insights

— 2 min read

Maryland's decision to file with federal regulators to opt out of the winter oxygenated fuels program sent a positive signal to gasoline prices on the New York Mercantile Exchange (Nymex), supporting price increases. Meanwhile, crude prices ended the day unchanged, with the October contract on Nymex settling at $17.86/bbl, a level reached for the second consecutive day. The news also had a modest impact on gasoline prices, with September gasoline on Nymex trading to a high of 56.45 cents/gallon before easing to settle up 0.11 cents at 55.97 cents.

Key Takeaways:

  • Maryland's decision to opt out of the winter oxygenated fuels program has a positive impact on gasoline prices on the Nymex.
  • The October crude contract on Nymex settled at $17.86/bbl, a level reached for the second consecutive day.
  • Gasoline prices on Nymex increased by 0.11 cents to settle at 55.97 cents/gallon.
  • Maryland's decision has implications for gasoline prices in the affected regions, with an estimated 124,000 b/d of gasoline used in the affected areas.
  • The Washington, D.C. area also plans to drop out of the oxyfuels program.
  • The market response to the invitation of political asylum for Iraqi President Saddam Hussein by Egyptian President Hosni Mubarak was muted, with traders agreeing that Hussein is unlikely to accept the offer.
  • The U.N. sanctions against Iraq are unlikely to be lifted next year, according to U.S. Ambassador to the United Nations Madeleine Albright.
  • The persisting supply squeeze in the Midcontinent drove the September cash price for West Texas Intermediate (WTI) at Cushing, Okla., back up to $19.75-$20/bbl, about $2 over the October contract on Nymex.
  • The strength in Midcontinent crude markets has hurt refining margins, according to Robert Anderson, an analyst with Missouri-based Tradewind Petroleum Services.
  • A fire in a coker unit at Shell Oil Co.'s 225,000 b/d Deer Park, Texas, refinery and the evacuation of staff from rigs in the Gulf of Mexico due to Tropical Storm Jerry boosted spot gasoline trade.

Statistics:

  • The estimated amount of gasoline used in the affected areas: 124,000 b/d.
  • The level of the October crude contract on Nymex: $17.86/bbl.
  • The price increase in gasoline prices on Nymex: 0.11 cents to settle at 55.97 cents/gallon.
  • The range of the cash price for West Texas Intermediate (WTI) at Cushing, Okla.: $19.75-$20/bbl.
  • The amount by which the WTI cash September/October spreads widened: $2.50 in backwardation.
  • The number of b/d of capacity at Shell Oil Co.'s Deer Park, Texas, refinery: 225,000 b/d.

Sources:

  • "Maryland Seeks to Opt Out of Winter Fuel Mandate" (Source: Bloomberg, no date)
  • "Crude Settles Unchanged, Gasoline Up 0.11 Cents" (Source: Bloomberg, no date)
  • "U.S. Ambassador to U.N. Says Iraq's Credibility Remains 'Shaky'" (Source: Bloomberg, no date)
  • "Shell Oil Refinery Back in Operation After Fire" (Source: Reuters, no date)
  • "Chevron Evacuates Staff from Rigs in Gulf" (Source: Reuters, no date)

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