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Refined Products

Recap: WTI fell along with equities, gaining additional weakness off of expectations U.S. crude oil inventories, which are already at record levels, increased by 3.6 million barrels during the week ending 2/5/16. March WTI slipped 5.9 percent, or $1.75 to settle at $27.94. This is the lowest settlement for a spot contract since September 2003. April Brent settled at $30.32, for a loss of $2.56, or 7.9 percent.

RBOB continued to trade at its lowest level since December of 2008, with the March contract falling 5.7 cents, or 6 percent, to settle at 89.90 cents a gallon. Refiners are offering deep discounts on gasoline, as they look to prepare for summer grade. Heating oil fell 7.2 cents or 6.8 percent to settle at 97.49 cents per gallon.

Fundamental News: The EIA's Short Term Energy Outlook reported that global demand of petroleum and other liquid fuels increased by 1.4 million bpd in 2015, averaging 93.8 million bpd.  Demand is forecast to increase by 1.3% on the year to 95.02 million bpd in 2016 and by 1.5% on the year to 96.48 million bpd in 2017.  It is down 0.2% and 0.1%, respectively from its previous estimate.  OPEC production is estimated to increase by 2.6% on the year to 39.2 million bpd in 2016 and by 2.2% on the year to 40.07 million bpd.  Meanwhile, US oil demand in 2016 is expected to increase by 0.6% to 19.49 million bpd and by 1.3% to 19.75 million bpd in 2017.  The estimate is down 0.2% and 0.3%, respectively from its previous estimate.  Gasoline demand is expected to increase by 0.8% to 9.23 million bpd in 2016 and remain unchanged in 2017.  US distillate demand is expected to increase by 0.6% on the year to 3.99 million bpd in 2016 and by 2.5% on the year to 4.09 million bpd in 2017.  US oil production is estimated to fall by 7.8% to 8.69 million bpd in 2016 and by 2.7% on the year to 8.46 million bpd in 2017.  In regards to prices, Brent crude oil prices are forecast to average $38/barrel in 2016 and $50/barrel in 2017.  WTI crude are forecast to average the same as Brent crude.  The price of gasoline is forecast to average $1.98/gallon in 2016 and $2.21/gallon in 2017.  The price of diesel is forecast to average $2.22/gallon in 2016 and $2.58/gallon in 2017.

Iran's Oil Minister, Bijan Zanganeh, said the country's oil industry will need $200 billion of investment to help it develop in the coming years, mostly from outside the country. 

The IEA said the world will store unwanted oil for most of 2016 as declines in US output takes time and OPEC is unlikely to agree with other producers to reduce output.  The IEA cut its forecast for 2016 oil demand growth, which now stands at 1.17 million bpd following a five year high of 1.6 million bpd in 2015, and reduced its estimate for demand for OPEC crude by 100,000 bpd to 31.7 million bpd.  The IEA reported that OPEC's oil output in January increased by 280,000 bpd to 32.63 million bpd due to an increase in Saudi Arabia's, Iran's and Iraq's oil production.     

According to Euroilstock, European crude oil and oil product stocks in January increased by 5.6% on the year and by 0.2% on the month to 1.138 billion barrels. 

Goldman Sachs commodity strategist Jeff Currie sees potential for oil prices to fall below $20/barrel if storage capacity is breached.  He said he would not be surprised if the market fell into the teens. 

According to PDVSA, Venezuela will raise its production by 80,000 to 100,000 bpd by the end of the year. 

Kuwait plans to raise its crude oil production by 150,000 bpd in the third quarter and aims to sign new export deals with European customers soon.  A senior Kuwaiti official said the country currently produces 3 million bpd and plans to increase its output to 3.15 million bpd in the third quarter of 2016. 

Early Market Call - as of 9:00 AM EDT

WTI - Mar $27.91, down 2 cents

RBOB - Mar $.9255, up 2.66 cents

HO - Mar $.9777, up 28 points

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Natural Gas

Tuesday, February 9th, saw the front-month NYMEX Natural Gas Futures Contracts open at $2.100, four cents below Monday’s closing price of $2.140.  Recording gains in the past two sessions, prices moved lower overnight. Dipping to the intraday low of $2.091 by 9:10AM, the contract then mounted a steady ascent to reach the intraday high of $2.134 sixty minutes later.  Trading along the $2.12 mark for the remainder of the morning, prices then dropped abruptly to $2.100 at the stroke of noon.  Rising higher from there, March peeked over the $2.13 level once again before tumbling gradually lower for the balance of the session, closing lower at $2.098.

This morning in Globex, WTI Crude was up 39 cents; Natural Gas was down four cents; Heating Oil was up one cent; and, Gasoline was up four cents.

Cash prices were higher in New York and lower in New England.

Natural Gas Glossary

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