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Refined Products

Recap: Oil markets moved higher Wednesday, helped by some bullish DOE inventory data released at 10:30am (ET), and was sustained despite a hawkish tone from the Federal Reserve later in the afternoon. The EIA released its weekly DOE Inventory Report, which showed a smaller than expected build of crude oil stocks of 2.1 MMbs (Bloomberg estimated 3.65 MMbs); but more bullish was the much larger than expected 5.3 MMb decline of distillates stocks on estimates of 1.4 MMbs. Gasoline stocks came in close to expectations with a 1.2 MMb draw, although according to Don Morton, senior vice president of Herbert J. Sims & Co., "Gasoline inventories are at a critical level. We have a number of refiners in critical locations that are out." (Dow Jones 10-29-14) Oil markets took the bullish opportunity to move prices higher as NYMEX ULSD (HO) finished up 4.19 cents to pass the $2.50 handle, settling at $2.5350, while NYMEX RBOB moved up 2.46 cents to $2.2207. Around 2pm (ET) after the Federal Reserve released a statement confirming the end of their quantitative easing (QE) bond purchasing program and opening the door for a quicker path to increasing interest rates, the crudes, NYMEX (WTI) and ICE Brent, retreated along with other commodities as the U.S. dollar strengthened. Markets were caught off guard with Fed statements such as this one: "If incoming information indicates faster progress toward the committee's employment and inflation objective than the committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated." (Reuters 10-29-14) NYMEX Crude came off its $82.88 high, settling at $82.20, up 78 cents on the day, while ICE Brent came off its $87.94 high, settling at $87.12, up $1.09. 

Currently, it seems yesterday's bullish momentum off of distillate DOE inventory data has given way to more digestion of the Federal Reserve's intentions to perhaps hasten the increase of interest rates, thereby strengthening the dollar, making commodities, including oil, less attractive. Additionally this morning, the following Reuter's newswire alert re-engages the bearish oversupply sentiment pressuring oil prices lower: (Reuters 30-Oct-2014 07:00) "REUTERS POLL-BRENT PRICE FORECAST SEES BIGGEST MONTH-ON-MONTH DOWNWARD REVISION SINCE FINANCIAL CRISIS IN 2008."  NYMEX USLD is down 2.07 cents to $2.5143, NYMEX RBOB is down 1.57 cents to $2.2050, NYMEX Crude is down 85 cents to $81.35, and ICE Brent is down 75 cents to $86.37. 

East Coast (PADD 1) DOE Inventory Report Recap:  For the week ended October 24, 2014, distillate stock declines on the East Coast (PADD 1) represented approximately half of the total 5.294 MMbs total decline at 2.479 MMbs. As fall refinery maintenance is in full swing, PADD 1 refiner operable capacity utilization rates were higher at 87% as compared to the U.S. average of 86.6%, and are 16% higher than last year's rates of 73.5%. Despite this strong refining, distillate stocks have been impacted by declining distillate imports that are 71% lower as compared to last year. The impact of 2 Canadian refineries that have been off-line for extended maintenance seem to be having an impact on PADD 1 product levels. PADD 1 (East Coast) distillate stocks decreased for the first time in two months and are now 5.6% higher than last year, but are 17.7% lower than the 5-year average (see chart below). PADD 1B (Central including NY) distillate inventories were hit the hardest, declining 2.29 MMbs to 21.75 MMbs and are now 4.6% higher than last year, but are 23.1% below the 5-year average. PADD 1A (New England) distillates also declined last week, and are 5.6% above last year and 30% lower than the 5-year average.  PADD 1C (Lower) declined slightly but is 14% higher than last year at this time, and 3.1% below the 5-year average. On the gasoline side, PADD 1 gasoline stocks decreased 1.385 MMbs to 50.8 MMbs, and are 9.4% lower than last year. Click here to view today's Refined Products MarketWatch.

Natural Gas

On Wednesday, October 29th – the settlement day for the November NYMEX Natural Gas Futures Contracts, November opened at $3.625, more than two cents below Tuesday’s closing price.  Prices rose immediately after the open, reaching $3.690 by 9:30 AM.  Prices then pulled back to the $3.67 level and drifted sideways into the noon weather update.  Encouraged by the bullish weather reports, buyers entered the market during the early afternoon session, pushing November to the intraday high of $3.765 around 1:30 PM.  The final hour of trading witnessed more selling than buying, as prices dipped to the low $3.70s heading into the close.  Some analysts pointed to the combination of short-term cold temperatures and continued short-covering as the primary driver behind Wednesday’s price gains.  November settled at $3.728 on Wednesday. 

The EIA Natural Gas Storage Report is due out at 10:30AM today.  The report is expected to show an 88 BCF injection to storage for the week ended October 24th.  This compares to a 45 BCF injection at this time last year and a five-year average injection amount of 59 BCF.

This morning in Globex, WTI Crude was down 70 cents; Natural Gas was up slightly; and, both Heating Oil and Gasoline were down.

New England cash prices were up, while New York cash prices were down.


 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.