Gasoline futures fell to near 7-year lows in New York trading on Tuesday as the selloff in crude oil extended to a relatively stable spot on the U.S. petroleum complex.
RBOB gasoline's front-month contract on the New York Mercantile Exchange traded just above $1.20 a gallon by 10:11 a.m. EST, after hitting a session low at $1.1979. That was the lowest for a front RBOB contract since February 2009, Reuters data showed.
U.S. crude's West Texas Intermediate (WTI) futures fell under $38 a barrel while global crude benchmark Brent broke below $40 as oil prices plumbed new lows since the 2008-09 financial crisis after producer group OPEC all but abandoned at its meeting on Friday attempts at price support.
"Gasoline shows new signs of weakness," said Scott Shelton, broker and commodities specialist at ICAP in Durham, North Carolina. "It appears that we will see progressively weaker prints into the middle of next week."
Until a few weeks ago, RBOB had been shielded from the rout in oil, trading between $1.30 and $1.40 a gallon, and lending support on some days to crude markets.
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On Monday, heating oil, also known as ultralow sulfur diesel, hit near 7-year lows along with WTI and Brent. But RBOB was relatively steady, sliding to just one-month lows.
The strength was partly due to the de-stocking of crude ahead of the year-end tax season that often results in higher refinery runs for gasoline, traders said.
Warmer-than-usual autumn weather and low pump prices have combined to create more road travels this time of year, some dealers said, giving refiners a steady profit margin above $13 a barrel for gasoline.
On Tuesday, forward contracts of RBOB through 2017 were trading at a premium to their previous months, indicating to some that gasoline could pick up faster than thought.
"Gasoline's trading range since October has been broken and in the short-term, when looking at front-month gasoline futures, the trend is now bearish," said David Thompson at Washington-based commodities brokerage Powerhouse.
"But gasoline contracts with the summer grade specs are still holding within their trading ranges," he said.
Jeffrey Grossman of New York-based BRG Brokerage concurred. "I certainly see more reward to the upside here. The key is not to go broke waiting for a correction."
