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Refined Products

Recap: NYMEX ULSD (HO) and NYMEX RBOB (Gasoline) were up early in trading and then jumped higher on what seem to coincide with the release of U.S. consumer confidence data at about 10:15 AM. "The Conference Board, an industry group, said its index of consumer attitudes rose to 90.9 from a upwardly revised 86.4 the month before. Economists had expected a reading of 85.3, according to a Reuters poll. U.S. consumer confidence in July was the highest since October 2007, the board said." (Reuters 7-29-14) NYMEX ULSD (HO) moved up 1.88 cents to $2.9067, and NYMEX RBOB moved up 2.17 cents settling at $2.8709. ICE Brent Crude moved slightly higher, 15 cents to $107.72, while NYMEX (WTI) Crude was the lone decliner on the day, losing 70 cents to settle at $100.97, with the September futures contract maintaining its premium to October at $1.24 cents, indicating on-going high crude demand from U.S. refineries.   

Currently,   the oil market looks exactly the opposite from yesterday with NYMEX Crude up 37 cents to $101.34, while the other contracts are down: ICE Brent down 15 cents to $107.57, NYMEX ULSD down 26 points to $2.9041, and NYMEX RBOB down 26 points to $2.8695. In addition to the EIA's weekly DOE Inventory Report release at 10:30am this morning, the FOMC (Federal Open Market Committee), the policy-making arm of the Federal Reserve Bank, will release its policy statement and is expected to be "one of the most important releases in some time." (Barron's 7-28-14) As the U.S. dollar hit a new high in 6 months on Monday against the other major currencies, the impact of the Fed's decision has yet another potential impact to oil markets. Expectations are that the Fed will continue its tapering program by cutting its bond buying by another $10 Billion, but all market participants will be looking for clues about when the Fed will actually start hiking interest rates.

DOE Inventory Estimates:  CitiFutures is expecting the following increase (build) or decrease (draw) ranges for the following: .5 to 1.5 MMb draw range for crude stocks. Bloomberg is expecting a 1.25 MMb decline, and  the 5-year average is a 3.6 MMb build. For gasoline, CitiFuture's is expecting  No change to a 1 MMb draw range, Bloomberg is expecting a 1 MMb build, and the 5-year average is a .7 MMb build. For distillates, CitiFutures is expecting a 1 to 2 MMb build range, Bloomberg is expecting a 1.5 MMb build, and the 5-year average is a 1.5 MMb build. For refinery runs, CitiFutures is expecting a 1 percentage point decrease in refinery % operable utilization to 92.8%,  and the 5-year average is 89.6%. The American Petroleum Institute (API) reported their results yesterday afternoon: Crude stocks declined 4.4 MMbs (with Cushing, OK crude stocks declining .9 MMbs,  gasoline stocks increased .1 MMbs, and distillate stocks increased .5 MMbs. The more definitive EIA inventory data will be released at 10:30am, and will likely prompt movement in either direction if results are outside of expectations.

Screws tighten on Russia: Yesterday, European Union officials reached an agreement on broad economic sanctions on Russia for its involvement in the downing of commercial Malaysia flight MH17. Influencing his European peers last week, Dutch Foreign Minister Frans Timmermans said of the sanctions, "the capital market restrictions will have a far-reaching and immediate effect." (Reuters 7-29-14) The sanctions "will shut state-owned Russian banks out of European capital markets and target the defence sector and sensitive technologies, including oil, but exclude the vital gas sector, on which Europe is heavily dependent" (Reuters 7-29-14) These sanctions are set to last one year, but will be reviewed quarterly for effectiveness. In a separate economic blow to the Kremlin, the Russian government was ordered to pay $50 Billion in damages to major shareholders for destroying oil producing company, Yukos, by the Permanent Court for Arbitration, the international body located at The Hague, Netherlands that rules on international corporate disputes. The Associated Press reported Monday that "the court said Russia had used tax claims to take control of Yukos in 2003 and silence its CEO Mikhail Khodorkovsky, an opponent of Putin, who had begun to use his vast wealth to fund opposition parties challenging Putin's power. Khodorkovsky was arrested at gunpoint as he boarded a plane in Siberia that year and spent more than a decade in prison as Yukos' main assets were sold to a state-owned company. Yukos ultimately went bankrupt." (7-28-14) Although Putin will most likely remain indifferent to the ruling, those investing in Russia most likely understand its magnitude as the Yukos ruling represents one of the biggest commercial arbitration awards in history.  Click here to view today's Refined Products MarketWatch.

Natural Gas

The Prompt-Month NYMEX Natural Gas Futures Contract opened at $3.756 on Tuesday July 29th – the final day of trading for the August Natural Gas Futures Contract.  This was slightly above Monday’s closing price.  August traded sideways around the $3.75 mark for the first 20 minutes after the open on light volumes.  Prices started to slide as traders tried to close out their August positions.  By 10:30AM August had fallen to $3.724 – the intraday low.  This turned out to be the new eight-month low.  After that a small rally took prices to the $3.75 mark by 10:45AM.  Prices mostly traded within a narrow band between $3.73 and $3.76 through the rest of the morning and early afternoon hours.  The last hour of trading saw buying interest enter the market, pushing prices up almost 10 cents to $3.834 (the intraday high) by 2:10PM.  August settled at $3.808 up $0.061 from Monday’s close.  This morning in Globex, WTI Crude was up 40 cents.  Natural Gas was down almost three cents.  Both Heating Oil and Gasoline were flat.

New England and New York cash prices were up.

Natural Gas Glossary

For access to Sprague’s full Natural Gas Market Watch Report including commentary not posted here, please send your request to or call 1-855-466-2842.