In the world of petroleum futures contracts, buying has dominated the market on Friday. Interestingly, while crude oil prices have experienced a notable increase, it is the refined product futures that are currently outpacing this upward movement. The front-month contracts are staying close to the day's high, indicating a surge in investor interest.
A noteworthy trend shift in the oil market is the transition from backwardation to contango in recent days. This contango move suggests that concerns regarding oil supply have temporarily eased. Although this remains true as of Friday, some of the outer-month contracts are starting to regress towards the previous pattern. For instance, while March West Texas Intermediate settlement was approximately 20 cents higher than January, today these contracts are essentially flat.
Most of the trading activity in NYMEX contracts has transitioned to January, but overall volumes seem to be slightly lower, despite Thursday's WTI trading that surpassed 1 million contracts in total volume.
On Friday, both WTI and Brent contracts have witnessed a significant increase of over $2. This resurgence comes after a decline of around $4 on Thursday. The front-month WTI is currently priced at $75.35 per barrel, exhibiting a substantial growth of $2.46, whereas the January contract reflects an increase of $2.44, settling at $75.57 per barrel.
Comparatively, the January Brent contract has experienced a greater surge than WTI, with the latest trade recorded at $80.18 per barrel, reflecting a remarkable increase of $2.76. Throughout late morning and early afternoon trading, the January Brent contract has oscillated above and below the $80 mark.
The refined product prices have also demonstrated noteworthy increases, ranging between 6 and 7 cents, with diesel showing stronger gains at present.
December ULSD: a Strong Week for Futures
December ULSD (Ultra-Low Sulfur Diesel) futures experienced a positive week, with notable gains in trading prices. Currently, December ULSD is trading at $2.8195/gal, up 6.92cts, while January is at $2.7402/gal, representing an increase of approximately 6.76cts.
ULSD has been the sole contract exhibiting week-to-week gains, thanks to a robust performance in the first half of the week. Consequently, spot markets have received support from this paper strength. However, the backwardation from December to January has limited the diesel prices in Los Angeles, which have depreciated by 15-20cts. This decline is largely influenced by the shift in reference month, exerting downward pressure.
RBOB Futures Also Surging
RBOB (Reformulated Gasoline Blendstock for Oxygen Blending) futures have registered an increase of over 6cts as well. The December contract is currently trading higher by 6.26cts at $2.1637/gal, while the January contract mirrors these gains, trading at $2.138/gal.
The upward trajectory in futures prices is also being reflected in most markets east of the Rockies. Gulf Coast and Chicago prices remain below the $2/gal mark. However, the West Coast market is presenting a more mixed outlook. Despite the significant upward movement in futures, L.A. CARBOB has only increased slightly by over one cent, whereas the San Francisco market is witnessing a decline of almost 10cts. This discrepancy can be attributed to narrowing premiums for CARBOB.