Petroleum futures experienced a significant drop on Wednesday as European traders said goodbye to the month of January. Brent futures saw a decline of $1.75-$1.90 per barrel, with the April contract falling by $1.91 per barrel to $80.59 per barrel. West Texas Intermediate faced even more difficulty attracting bids, with March futures down $2.05 per barrel at $75.77 per barrel.
The main catalyst for this movement seems to be a story from the Financial Times suggesting that Iran-backed militias have halted attacks on U.S. forces. While data released by the Energy Information Administration on Wednesday provided a somewhat neutral outlook for crude, with U.S. production seeing a rise of 700,000 barrels per day due to increased output in the Permian Basin and the Bakken, low refinery runs and heavy maintenance in the first quarter of 2024 may have an impact.
RBOB gasoline prices experienced instability throughout the morning, particularly with winter gasoline supplies being abundantly available across the United States, with excessively high inventories in the Midwest. The February RBOB contract, expiring on Wednesday, recorded a loss of 7.37 cents per gallon to trade at $2.187 per gallon at midday. The March contract also witnessed a decline of 6.78 cents per gallon, settling at $2.2290 per gallon.
Similar losses were observed in all spot markets for winter gasoline trading. Bulk venues east of the Rockies suffered losses of 6-7.5 cents per gallon, except for Southern California where prices rose by over 7 cents per gallon, trading at a 40 cents per gallon premium above CME RBOB due to the new RVP spec of 5.99 psi.
Diesel prices, on the other hand, increased as Europe and the U.S. East Coast faced relatively low inventories of distillate fuel. Latin American demand from these regions remains strong, and U.S. exports are expected to surpass imports by 1 million barrels per day through February.
On its final trading day, February ULSD experienced light trading with a midday price of $2.809 per gallon, reflecting a 0.22 cents per gallon increase. The March contract saw a more significant rise, increasing by 1.77 cents per gallon to $2.7943 per gallon.
Reporting by Tom Kloza; Editing by Michael Kelly