Gasoline futures prices less than distillate futures in April, May

In April and May, gasoline futures prices were lower than distillate futures prices for the first time since 2013, according to the U.S. Energy Information Administration. In the spring and summer, gasoline futures prices are usually higher than distillate futures prices by between five and 10 cents per gallon as U.S. gasoline demand is higher in the spring and summer, and the summer-grade gasoline sold in those months costs more to produce.

In April, the front-month futures price of reformulated blendstock for oxygenate blending (RBOB, the petroleum component of gasoline) was 2 cents per gallon less than the front-month futures price of ultra-low sulfur diesel (ULSD). In May, the RBOB front-month price was 3 cents per gallon less than the ULSD front-month price.

So far this year, the amount of U.S. gasoline supplies and gross exports are expected to rise 2%, from 2017, according to the EIA. U.S. gasoline inventories have been higher than the previous five-year average for most of 2018. The higher gasoline inventories have affected its value when comparing the value of distillate and gasoline to crude oil. This comparison to crude oil is known as the crack spread, and the RBOB-Brent crude oil crack spread was 34 cents per gallon in April and 35 cents per gallon in May. The spread was previously lower in those months in 2012.

In other areas throughout the world, higher gasoline inventories also have led to lower gasoline crack spreads. This includes trading hubs in northwest Europe and Singapore, which had higher gasoline inventory levels than their previous five-year averages in 2018.

Distillate demand also has impacted distillate and gasoline futures prices. Colder-than-normal weather that lasted through April in areas of the United States led to higher consumption of heating oil, and a growing economy and increasing oil and natural gas drilling have also contributed to increased demand for diesel and higher ULSD prices.

Unlike gasoline inventories, U.S. distillate inventories have fallen since January, and as of May 18, were expected to be less than their five-year average. As of May 24, distillate prices in major trading hubs in northwest Europe and Singapore were less than their five-year ranges.