Domestic gasoline futures showed a strong performance just before Sandy hit U.S. shores on Monday, though Brent and crude decreased somewhat. Most of the East Coast refining sector decided to suspend operations over Monday, which allowed for some preparation for Sandy’s impact.
Domestic heating oil futures rose to their highest against domestic crude as dealers, and investors opted to hedge against expectations of widespread power failures and flooding.
It’s clear that Sandy has had a major impact, and refineries and production could remain closed for several days, if not weeks. Crack spread (difference in value between a barrel of heating oil and a barrel of crude) hit $45.15 last Thursday.
“Markets will be watching for reports of damage to energy infrastructure, notably refineries, post-Sandy given the state of extremely low gasoil inventories as we move into winter season,” Deutsche Bank analysts said.
Front month RBOB gasoline futures reached their highest price since mid-October – $2.8115 per gallon – on Monday, before dropping off quickly as traders began to account for the reduced fuel demand caused by comprehensive shutdowns of ports and airports all over the East Coast.
By around 1PM Eastern, gasoline futures for November rose 1.5 percent to touch $2.7417 per gallon. U.S. heating oil for November rose by 1.97 cents to $3.1175 per gallon.
Anticipating Sandy, refineries shut down en masse, leading to a major reduction in the demand for crude oil. That, naturally, caused domestic crude futures to drop.
Brent crude for December fell to $109.10 per barrel, while U.S. crude for December dropped by $1.20 to reach $85.08 per barrel.
Overall, U.S. crude futures are likely to be down more than 7 percent by the end of October, coming on top of a 4 percent decrease in September. And Sandy’s just made things a whole lot worse.