U.S. gasoline futures have joined this month's blistering crude oil rally with a vengeance, staging their biggest gain in over two years as a string of unplanned refinery outages trips up traders.
The accelerating gains in gasoline, which jumped as much as 4 percent on Friday while crude barely rose less than 1 percent, are the latest sign of a wider rethinking of oil market fundamentals that has abruptly reshaped the market in just two weeks.
Crude oil futures on the New York Mercantile Exchange (NYMEX), which had been trading at a discount of more than $20 a barrel to Brent crude prices at the start of the year, are now trading $3 lower than the international benchmark. New York Harbor gasoline futures, which for years had been moving in sync with Brent, are now breaking higher on their own.
Both moves may say more about local market dynamics than global macro conditions: Just as the Brent gap has been erased by signs of a diminishing glut of crude at the NYMEX delivery point in Cushing, Oklahoma, the surge in gasoline follows unexpected outages at several East Coast refineries, forcing them to quickly buy extra fuel.
And both have been led by an intense scramble to buy prompt contracts, twisting markets into a steeply backwardated structure that suggests prices may ease in coming months.
Prices for August Reformulated Blended with Oxygenated Blendstock (RBOB), the benchmark that helps set gas station prices across the nation, have jumped 14 percent since July 1, the biggest such rally in over two years, apart from a short-term expiry squeeze last September. They have handily outpaced Brent, which has gained just 4.5 percent over the period.
Suddenly retail gasoline prices, which had been drifting round $3.50 a gallon, near the lowest level since January, could bolt toward $4 if the current futures price holds.
"Refinery capacity is going down at the height of the driving season," said Andy Lebow, vice president at Jefferies Bache in New York.
Concerns about supplies are so great that front-month gasoline prices jumped 2 cents in the span of just 10 minutes on Friday, hitting their highest since March on news of at least three new refinery outages, and more signs that companies that normally sell fuel into the New York Harbor turned buyers.
The rash of outages threatens to sap supply just as consumer demand begins to accelerate. Worries over U.S. biofuel mandates has also caused biofuel credits to spike to record highs, threatening to add to refiners' costs and, likely, pump prices.