Refined Products: 2017 Takeaways, 2018 Outlook

  • 5 Feb 2018
  • By Elizabeth Hui
  • Topics: Energy

The gasoline and distillates markets had an eventful year in 2017. This was characterized by strong fundamentals which increased the level of activity in the futures markets. RBOB Gasoline and NY ULSD futures reached record volume and open interest records due to strong growth in exports.

Physical exports surge

In 2017, the U.S. petroleum products markets showed strong export growth that drove product demand and spurred strong refinery margins in the U.S. Gulf Coast.  Distillate exports rose to a record high of 1.7 million barrels per day (b/d) in July 2017, while gasoline exports also exhibited growth averaging 680 thousand barrels per day (b/d).

Hurricane season disrupts prices

Overall gasoline and distillate prices remained subdued in 2017, until the hurricane season arrived in the third quarter. Hurricane season drove RBOB gasoline futures prices to a 2-year high in August 2017 as attention was focused on Hurricane Harvey which caused severe flooding and refinery shut downs along the Gulf Coast. Prices reached as a high as $1.7799 per gallon, the highest level since July as refinery outages and pipeline disruptions created supply constraints.  Meanwhile, ULSD prices remained steady until the fourth quarter when the markets rallied as U.S inventory levels declined.

Petroleum product’s days of supply reached its lowest level in years due to high gasoline and distillate demand in the U.S. market. Gasoline consumption increased over the summer driving season drawing down inventories while distillate use showed a seasonal pattern of higher consumption over the winter season.


Futures volumes surge

RBOB Gasoline and NY ULSD futures showed strong performance in 2017 with record volume and open interest records reported in both benchmark contracts. RBOB gasoline traded 481,110 contracts and NY ULSD traded 349, 145 contracts. Average daily volume saw an increase of 10% and 11% year over year, as open interest rose to 453,416 contracts and 469,752 contracts over the 2017 period.

Looking forward

U.S. gasoline and distillate demand is expected to increase in 2018 due to continued export growth from Emerging market and Asian economies where import demand will be the primary drivers of growth.

Further, petroleum product prices are expected to be higher reflecting crude oil prices. Colder than normal temperatures in early 2018 remain a supportive factor of higher consumption during the winter months and refinery demand.  Export growth will likely be the main driver of growth in 2018 as export volumes and number of destinations continue to increase.



All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author(s) and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.