Petroleum Product Prices Rise Amid Improved Refining Margins

WASHINGTON -- The prices of petroleum products jumped on June 23, 1994, as refining margins improved dramatically due to increased domestic crude oil costs. Gasoline and distillate fuels gained on domestic crude oil costs, while natural gas prices dropped below $2/MMBtu on the expiring July futures contract.

Key Takeaways:

• July futures of unleaded regular gasoline rose 0.94 cents to 54.49 cents/gallon, and July No. 2 heating oil futures increased 0.85 cents to 50.68 cents/gallon.
• The 3-2-1 crack spread, a key indicator of refining profitability, jumped 27 cents/bbl to $2.93/bbl, reversing the previous day's decline.
• Crude oil prices declined due to perceptions that West Texas Intermediate (WTI) is overvalued versus world markets and eased tensions over a possible war in Korea.
• August North Sea Brent futures climbed 17 cents to $17.36 on London's International Petroleum Exchange, narrowing the WTI-Brent spread to $2.06/bbl.
• Leading buyers of domestic crudes reduced postings, lowering the price of term contract WTI to an average of $18/bbl.
• Investment funds, which had previously driven the surge in WTI prices, are now taking profits, citing concerns that crude prices could be peaking.

Statistics:

• WTI crude oil futures for August delivery rose 5 cents to $19.42/bbl.
• The 3-2-1 crack spread increased 27 cents/bbl to $2.93/bbl.
• July No. 2 heating oil futures rose 0.85 cents to 50.68 cents/gallon.
• August North Sea Brent futures climbed 17 cents to $17.36.
• August spot WTI at Cushing, Okla. slipped to $1.99/bbl.
• Term contract WTI prices averaged $18/bbl.

Sources:

• "Petroleum Prices Rise Amid Improved Refining Margins," The Oil Daily, June 23, 1994
• "Crude Oil Prices Decline, WTI-Brent Spread Narrows," The Oil Daily, June 23, 1994
• "Natural Gas Prices Drop Below $2/MMBtu," The Oil Daily, June 23, 1994
• The New York Mercantile Exchange (NYMEX)
• The International Petroleum Exchange (IPE)