Crude oil and refined product futures gave back some of Monday's gains at midday Tuesday.
The pullback has narrowed crack spreads, particularly for gasoline, as declines in Nymex RBOB contracts exceeded those for oil contracts.
In addition to profit taking and post-rally position squaring, trade sources blamed some of the weakness on Tuesday's International Energy Agency report, which forecast continued weak oil demand in China and plans by U.S. refiners to trim runs because of weaker margins. IEA also said it expects markets will be oversupplied in 2025 if OPEC begins to unwind production cuts.
Just ahead of midday, both the Nymex West Texas Intermediate and ICE Brent contracts were close to the lows of the day. The September WTI contract was off by $1.57 to $78.49/bbl and October Brent was down by $1.47 to $80.83/bbl.
Market sources also pointed to a tightening of the WTI-Brent spread on an overhang of physical cargoes, thanks largely to a slowdown in China. The October WTI-Brent spread at late morning was at $3.96/bbl.
The September WTI contract settled Monday at $80.06/bbl after adding $3.22, the largest single-day increase so far this year. The October Brent contract rose by $2.64 to $82.30/bbl.
Refined product contracts also were lower, led by a weaker September RBOB contract, which was pricing at about 1ct/gal below the September ULSD contract.
The September RBOB losses were deeper than those for crude, putting pressure on paper crack spreads and some weakness in spot markets is adding to refinery margin woes.
The September RBOB contract was down by 5.96cts at $2.3841/gal, leaving it fractionally above the morning low. Most of the decline is concentrated in the front month and that has reduced the spread between September and October to about 17.5cts.
The September RBOB contract was pricing at about $21.50/bbl above September WTI. Should that difference hold through settlement, it would mark the lowest paper crack spread since late February.
Fourth-quarter crack spreads also are in the low teens, with sub-$10/bbl crack not out of the question. The RBOB crack was last below $10/bbl in October. ULSD contracts were turning in a comparatively better performance, with the NYMEX September ULSD contract off by 1.23cts to $2.3942/gal. Current prices are about 0.75ct above morning lows.
U.S. spot refined product markets were mostly tracking declines in futures, though wider discounts in the Group 3 and Gulf Coast markets were amplifying weaker futures.
This content was created by Oil Price Information Service, which is operated by Dow Jones & Co. OPIS is run independently from Dow Jones Newswires and The Wall Street Journal.
--Reporting by Denton Cinquegrana, dcinquegrana@opisnet.com; Editing by Jeff Barber, jbarber@opisnet.com
(END) Dow Jones Newswires
08-13-24 1235ET
