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Bank of America Reports Pop in Oil Prices

A Bank of America commodities memo from January 29 reports a jump in oil and gas prices, led primarily by RBOB Crude Oil.

“The oil complex, led by RBOB, ripped higher yesterday on news that Hess would be closing its Port Reading, NJ refinery by the end of February. RBOB prompt cracks rallied $2/bbl and Cal13 structure gained 5 cents/gallon when the news hit the wire. The closure takes 50-60k bbls/day of gasoline production out of Padd 1 going into the summer, with Girard Point already going into turnaround for 45 days on Wednesday. Though not a game changer, this exacerbates the already short supply situation in Padd 1, a region that typically cannot resupply itself during the summer. With demand performing decently well and production clearly on the seasonal down slope, the Padd 1 gasoline outlook is very strong. Heating was initially dragged higher on the news but was sold quickly, with cracks closing at previous lows and spreads nearly unchanged.

WTI and Brent followed RBOB as well, gaining 90c and 50c, respectively. However, crude too was unable to hold the gains, coming off $1.20-$1.30 from the highs as producers took advantage of the spike to sell flat price. Crude eventually rallied back to unchanged over the remainder of the session, settling up 56c in WTI and 20c in Brent. WTI Dec13/Dec14 continues to rally, widening by another 20c, its highest since September 2012.”

In doing so, the Bank of America highlights something that we at Pumps have been saying for a long time. Underlying supply issues in gas and oil markets continue to expose themselves whenever the smallest of price shocks occur. Even during what ought to be a cyclical period of relative decline, prices continue to shoot up at unpredictable intervals. What is predictable, however, is the need for protection against these events.

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