The factors that pushed front-month RBOB to a recent seven-month high of $3.4258/gal could be transferring to the November contract, despite the change to winter grade specification.
"We see ongoing risk of a renewed price squeeze when it comes to the November RBOB gasoline futures contract because inventories may take time to reach more comfortable levels," Citi Futures Perspectives analyst Tim Evans said in a note.
The backwardation in the RBOB term structure has been persistently wide for the first 10 days of the November contract, averaging 13.16 cents/gal, despite the switch to winter grade, which occurred in September. A year ago, the RBOB backwardation averaged 6.12 cents/gal.
US Energy Information Administration data showed US gasoline stocks were at 195.942 million barrels as of the reporting period ending September 28.
This puts US gasoline supplies nearly 4% below the EIA five-year average. But the story is even more dire on the US Atlantic Coast. USAC gasoline stocks are nearly 13% below the EIA five-year average, at 46.146 million barrels.
US gasoline demand for September averaged 8.68 million b/d, according to EIA data. This is down from 8.92 million b/d for the same period a year ago, and suggests that the strength in RBOB comes from supply constraints rather than strong demand.
Data from the American Petroleum Institute will be released Wednesday at 4:30 p.m. EDT (2030 GMT). Holiday-delayed EIA numbers will be published Thursday at 11 a.m. EDT (1500 GMT).
Analysts polled by Platts Monday expect US gasoline stocks to remain unchanged, which would likely be bullish for RBOB futures.
November RBOB futures were 1.21 cents higher at $2.9708/gal around 12:20 p.m. EDT (1620 GMT). ICE GASOIL BACKWARDATION SUGGESTS TIGHT SUPPLY, EMERGING MARKET DEMAND
There has also been quite a bit of strength in ICE gasoil futures, as the front-month October contract traded $20.25 higher at $1,022.25/mt Wednesday.
Like RBOB, the backwardation in gasoil futures is also wider year-on-year, averaging $12.25/mt over the past four trading sessions. A year ago, backwardation in the same contract averaged around $4.75/mt.
Refinery maintenance in the Amsterdam-Rotterdam-Antwerp trading hub and in France saw a fall in gasoil availability, Platts reported Tuesday. In addition, exports of gasoil from Russia were also below their typical volumes per month, due to their own refinery maintenance period as well as internal Russian demand, traders said.
European exports remained strong, with cargoes going to West Africa, South America and the Mediterranean.
A NWE gasoil trader said the flows from the US were also lower than usual. "There is hardly any US flows. We used to get 300,000 mt to 400,000 mt," a NWE gasoil trader said.
NYMEX November heating oil was trading 2.73 cents higher at $3.2305/gal Wednesday. Heating oil futures are influenced by US and global ULSD stocks, which are currently tight. The US also exports ULSD to many of the same markets.
EIA data shows US low and ultra low diesel stocks at 96.675 million barrels are nearly 10% below the five-year average.
