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Fuel Marketer Intelligence: Supply Chain Dynamics to Retail Fuel Prices

August marked the second highest market participation rate for the Reformulated Blendstock for Oxygenate Blending futures contract traded on the New York Mercantile Exchange on record, with a sleepy oversupplied gasoline market enlivened by speculation of upcoming coordinated action by the Organization of the Petroleum Exporting Countries to boost global oil prices.

Data on futures positions from the Commodity Futures Trading Commission shows noncommercial traders, also known as speculators since they are not using the futures contract to hedge an underlying physical position, reduced a net-long position in RBOB futures in late July to the lowest point in more than a year. A long position is taken on expectation for prices to move higher, so the liquidation of these contracts by speculators indicates a bearish sentiment for the US gasoline market.

As discussed in our previous blog, Summer Hope Dashed as Gasoline Supply Swamps Market, the gasoline market was under price pressure in July on bloated inventory and despite peak seasonal demand, with demand on pace to set a record high this year. The long liquidation in July as evidenced in CFTC’s Commitment of Trader’s reports left the market vulnerable for a price rally.

The bearish sentiment for gasoline futures in ending July was appropriate given the market’s fundamental disposition. Despite record high summer demand, gasoline inventory had increased for three consecutive weeks through July 22 to reach a nearly three-month high of 241.5 million bbl, sitting 25.3 million bbl or 11.7% above the five-year average, data from the Energy Information Administration shows.

As the August RBOB futures contract expired on July 29, the market was also confronting the seasonal change that occur...