Specification Changes Are Coming But Will Prices Soften

As we head into the month of August, the New York Mercantile Exchange front month futures shifts to September. When we think of September we think of the fall and the seasonal changes to gasoline specifications. While the price spread between the expiring August contract (summer grade) and the October contract (reflecting higher reid vapor pressure) is over $0.20 per gallon. Will the market prices go down as the spread suggests?

Physical prices seem to be meandering in a price range trading news. Since June 20th WTI crude oil has been trading from $54.40/BBL to $60.50/BBL. The situation with Iran and potential disruption in the Straight of Hormuz is bullish, along with OPEC’s production cuts, bullish crude draws, and the hurricane season. Fear of weak demand has been keeping the markets on edge even with all the bullish sentiment.

Our bet is we will not see the typical fall price swoon with all that’s happening.

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