March Madness

gas_prices-1Notwithstanding OPEC production cuts, Venezuela sanctions restricting crude supply to the US Gulf Coast driving the market higher, retail gasoline prices are poised to make their annual spring run. Seasonal specification changes in gasoline have a significant impact on price.

On February 27th, the front month NYMEX contract (March) settled at $1.6293. March trades winter grade, high RVP gasoline. The April contract closed that day at $1.7523. April begins to trade a lower RVP specification with a $.1230 per gallon increase. We have not seen the full price increase downstream yet as physical gasoline in terminals are still winter grade. That product trades at a discount to April futures at the moment but as March wears on that discount will narrow in revealing the true cost of lower RVP grade products.

Piling on top of the above is the question; will the Allegheny County PA formally accept a RFG waiver for the Pittsburgh market? Pennsylvania’s gasoline specification outside of the Philadelphia market is a sub octane conventional grade product. This material trades at a steep discount to the Reformulated (RFG) product the EPA mandated in Pittsburgh Mid – May through Mid – September. The price spread between these products has been as much as $0.20 cents per gallon in the past.

What does this mean to the driving public?  Gas Buddy reports retail prices in Pittsburgh today at $2.599 to $2.699 per gallon for 87 grade octane unleaded gas. By mid-April, prices could easily be $2.829 for summer grade conventional gas and for reformulated gas, you can expect retail prices to breech the magic $3.00 price in Pittsburgh.

Of course, it is possible the situation in Venezuela will change and oil will flow. It’s also possible OPEC’s production cuts have less of a price impact. Not likely though as the cartel has already tabled an April meeting to June. It’s also possible Pittsburgh will get a reprieve from the highest priced product, reformulated gasoline in the United States outside of California.  

At the time of our next writing in four weeks we will know a whole lot more.

Written by:
Pam Corn

As Director of Marketing for Guttman Energy, I provide expertise within advertising strategies, digital marketing, and public relations to communicate our key messaging to our stakeholders. I offer diversified leadership, drive innovation and cutting-edge business, branding, to generate interest in Guttman service offerings.

Guttman Energy Daily Market Update Disclaimer – The information contained in this market update is derived from sources believed to be reliable; however this update could include technical inaccuracies or typographical errors and Guttman Energy does not guarantee the accuracy, completeness or reliability of this update. FURTHERMORE, THIS UPDATE IS PROVIDED “AS IS,” WHERE IS, WITH ALL FAULTS AND WITHOUT ANY WARRANTY OR CONDITION OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY. GUTTMAN ENERGY ALSO SPECIFICALLY DISCLAIMS ALL EXPRESS AND IMPLIED WARRANTIES. YOU USE THIS UPDATE AT YOUR SOLE RISK. This update and any view or comment expressed herein are provided for informational purposes only and should not be interpreted in any way as recommendation or inducement to buy or sell products, commodity futures or options contracts.