Article by ForexTime
Crude oil prices edged higher on Monday morning following another decline over the past week driven by declining gasoline prices. Gasoline prices at the retail level continue to move lower as declining crude oil prices and a falling crack spread has undermined prices. Historically, during the fall, prices generally decline as consumers drive less following summer vacations.
In addition to falling crude oil prices, easing wholesale gasoline market conditions have contributed to lower retail prices, as indicated by falling gasoline crack spreads. The gasoline crack spread is calculated as the difference between the price of gasoline for prompt delivery, represented by the Nymex futures price for reformulated gasoline and the WTI crude oil futures price.
The gasoline crack spread has fallen by about 6.5 per barrel from its June level of $16.50 per barrel to an average of $10 per barrel in October. This year ’s crack spread decline is similar to the average June-October decline observed from 2009-13, and it reflects typical seasonal factors such as declining gasoline consumption and the switch to winter-grade gasoline.
From 2009 to 2013, the spread between the U.S. average retail price for regular gasoline and the wholesale price for regular gasoline, as represented by the front-month Nymex RBOB contract, has averaged $0.68/gallon. This spread typically peaks in early autumn before moving back in line with its annual average during November. On October 24, the Nymex RBOB contract for November delivery closed at $2.18/gallon, leaving the retail/RBOB spread at $0.88/gallon. This means that there could be further declines in retail gasoline.
The U.S. average price for regular gasoline fell six cents in the past week to $3.06 per gallon as of October 27, 2014, 24 cents lower than the same time last year and the lowest price since December 27, 2010. The U.S. average diesel fuel price fell two cents from last week to $3.64 per gallon, 24 cents lower than the same time last year.
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