RBOB Futures Spike Again

NEW YORK (DTN) -- The September RBOB futures contract on the New York Mercantile Exchange continued to rally Wednesday morning to a fresh 25-month high after more refineries and pipelines shut as Tropical Storm Harvey turned to western Louisiana today after unleashing its fury on southeastern Texas over the past several days.

The storm drenched Beaumont in southeastern Texas with 26 inches of rain in the past 24 hours, with 20 more inches expected, said the National Weather Service. Motiva's 605,000-barrel-per-day (bpd) Port Arthur refinery, ExxonMobil's 348,600 bpd Beaumont oil refinery and Marathon's 451,000 bpd Galveston Bay plant are the latest refineries to shut down due to what has been described as a historic storm.

The latest outages bring the nation's refining run rate down by about 23% to 77% capacity, according to several reports. Colonial Pipeline also on Tuesday announced an interruption of service at the origin point on its system in the Houston-area, which is expected to further boost New York Harbor refined product market.

The supply disruptions will most likely skew weekly oil inventory data for several weeks, said analysts.

The market now awaits the Energy Information Administration's weekly oil report to be released at 10:30 a.m. EDT. Late Tuesday, the American Petroleum Institute reported stock draws of 5.78 million barrels (bbl) for crude oil and 486,000 bbl for middle distillates, and a 476,000 bbl stock build for gasoline.

Overseas, the oil production outage in Libya and talks by Saudi Arabia and Russia to extend ongoing oil production cuts by the Organization of the Petroleum Exporting Countries and their 10 non-OPEC allies through June 2018 have helped to widen the Brent premium over WTI to $5.53 bbl at last look.

In early trade, the September RBOB futures contract climbed 10.67 cents to $1.89 gallon, and has since posted a $1.922 gallon fresh 25-month spot high ahead of its expiration on Thursday. The September RBOB contract traded at a 23.26 cents premium to the October RBOB contract, which was up 5.55 cents to $1.6574 gallon. The wide backwardation reflects short-term supply concerns due to the storm effect.

The September ULSD contract climbed 3.25 cents to $1.6980 gallon, off a $1.7161 gallon six-month spot high ahead of its expiration Thursday, while the October contract was up 2.55 cents to $1.6795 gallon.

The October West Texas Intermediate crude contract was down 46 cents to $45.98 bbl after inside trade. The October Brent crude contract on the IntercontinentalExchange was down 49 cents at $51.51 bbl, off a better than one-week spot low of $51.35, before the contract rolls off the board on Thursday. The November Brent contract was down 34 cents at $51.32 bbl.

George Orwel can be reached at george.orwel@dtn.com