Yesterday, HO closed down $0.0128/gal to $1.0876, RBOB closed down $0.0345/gal to $1.1749, and WTI crude closed up $0.33/bbl to $36.14. The gain in WTI was because contracts moved to the month of February. Brent crude closed at $36.11, making it the first time that WTI closed higher than Brent since August 2010. If U.S. production of crude declines, we could continue to see this.
There is also something unusual going on with refined product prices. Gasoline is currently trading eight to nine cents higher than heating oil. The spread between heating oil and gasoline is known as the Widowmaker, due to seasonal volatility. In the past, heating oil has always been the stronger of the two fuels in December. With lower imports, U.S. refiners have had to make up the shortfall and more gasoline production results in more distillate production as well. Warm weather is a big factor in this because it has drastically decreased demand for heating oil. Oil refiners will produce as much gasoline as possible since the profitability is much better than it is for heating oil. The graph below shows the crack spreads for both gasoline and heating oil.
The API data released last night showed a draw of 3.5 million barrels of crude inventories, a build in gasoline of 3.1 million barrels, and a build in diesel of 763,000 barrels. The bullish reports for crude have been seen in the gains in the market this morning. The DOE statistics released at 10:30 AM today showed a draw in crude of 5.8 million barrels, with a build of 2.0 million barrels in Cushing. There was a build in gasoline of 1.1 million barrels, and a draw in distillates of 661,000 barrels.