Refined Product Rally Continues on Friday Trading

The rally in refined products witnessed over the past couple of days has extended into Friday trading. The leading force behind this upward momentum is ULSD futures, which have shown an increase of around 5 cents for the first two months of trading.

As trading volumes started to thin out on Friday, momentum continued to push prices higher. Most of the activity has shifted into the February contracts, with ULSD currently experiencing a slight backwardation, albeit by just a few pennies.

Heading into midday, January ULSD prices were up by more than 5 cents, with the contract trading at $2.6435 per gallon. If the current increase holds, prices will have rallied by more than 13 cents since Wednesday. On the other hand, the more active February contract showed an increase just under 5 cents, trading at $2.6152 per gallon. This marks a break in the week-to-week streak of declines.

While the RBOB contract is seeing solid gains on Friday, these increases are not as significant as those observed in ULSD. The January contract for RBOB is up by 1.38 cents at $2.1322 per gallon, while the February contract is up by 1.45 cents, currently trading at $2.1437 per gallon.

Strength in Futures and Physical Markets

Gasoline prices along the Gulf Coast have experienced a notable increase, rising by approximately 4.75 cents. This surge can be attributed to the narrowing discount for prompt barrels, which has now dropped to less than 20 cents. Conversely, New York has experienced a slight pullback in gasoline prices as prompt gasoline in the harbor has been offered at a discount for the past few days. As a result, this has put pressure on Colonial line space, with values falling within the 5-cent range.

Shift in Retail Prices Expected

Despite the recent fluctuation in gasoline prices, today's retail average has fallen to $3.087/gal, as reported by AAA. This represents the lowest national average in over two years. With the positive momentum observed in futures and spot prices, it is anticipated that retail prices will start to shift in the upcoming week.

Futures Trading and Prices

Both West Texas Intermediate (WTI) and Brent futures are currently trading without significant changes following an initial period of selling. In the case of WTI, January options have recently expired, leading to a majority of the trading activity focusing on February contracts. Currently, January WTI stands at $71.50/bbl, experiencing a slight decrease of 8 cents, while February is also slightly lower at $71.84/bbl. On the other hand, February Brent futures have shown a minor increase of 3 cents, reaching $76.64/bbl in their most recent trading session.

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