As we head into the month of August, the New York Mercantile Exchange front month futures shifts to September. When we think of September we think of the fall and the seasonal changes to gasoline specifications. While the price spread between the expiring August contract (summer grade) and the October contract (reflecting higher reid vapor pressure) is over $0.20 per gallon. Will the market prices go down as the spread suggests?
On May 7th we reported the beginning of the end of the spring gasoline price rally. After six weeks of gains on the NYMEX, and summer grade gas specification changes piling on more cost, retailers were unable to pass through daily wholesale price increases.
Notwithstanding OPEC production cuts, Venezuela sanctions restricting crude supply to the US Gulf Coast driving the market higher, retail gasoline prices are poised to make their annual spring run. Seasonal specification changes in gasoline have a significant impact on price.