OPIS Headlines

December 19, 2014
Retail Diesel Margins Keep on Trucking; Some States Flirt with $1 gal Rack-to-Retail

It is wonderful to be a truck stop operator these days or to have a brisk diesel business at a c-store.

Most recent OPIS data, featured in this week’s Retail Fuel Watch publication, shows rack-to-retail margins averaged 78.8cts gal in the seven day period ending December 15. That is the highest gross margin ever recorded, and puts gross profit margins for diesel fuel at a robust 23% of sales value.

Many individual states show even more stunning returns for c-stores or truck stops that retail diesel fuel. Colorado diesel sells at an average 98.7cts gal over average wholesale costs, at least for those that pay street prices. Also topping 90cts gal are Iowa, Minnesota, Nebraska, Ohio, South Dakota, Utah, and Wisconsin.

However, all of these states pale when one looks at North Dakota diesel margins, an area with very high demand thanks to the need to power trucks and support equipment in the Bakken Shale.  The difference between the wholesale cost (plus taxes) and retail price in the state is a whopping $1.221 gal.  The margin comes thanks to an 82.2cts gal drop in wholesale costs, and a much more modest 18.7cts gal dip in street prices.

There isn’t anything remotely resembling a misery index among diesel retailers these days.  The thinnest retail margins show up in Alaska (34.7cts gal); Delaware (45.9cts gal); and Pennsylvania (53.5cts gal).  In all, only six states sport rack-to-retail spreads of less than 60cts gal.

Within the states, there are a number of markets where diesel fetches margins of over $1 gal on the street. The Fargo area of North Dakota tops the list, with average margins of $1.199 gal with Bismarck just behind at $1.178 gal. San Francisco retailers can count on diesel margins of about $1.12 gal and Washington D.C. finds a $1.10 gal return on the street. A number of Colorado metropolitan areas also top $1 gal in margin, as do markets such as Rochester, MN; Madison, WI; and Sioux Falls, SD.

Of course, much of the truck stop business finds larger fleets that do not pay retail prices. Instead, many of the larger or medium sized haulers buy fuel on a “Cost-Plus” basis with prices tied to OPIS rack averages plus or minus a negotiated differential. In those cases, fleet purchasers may be purchasing fuel commonly at 50cts gal or more below posted street prices.

Helping to offset some of the lower returns on cost-plus sales to fleets, however, are extensive rack discounts across the country. OPIS has observed common rack discounts of 5-20cts gal from coast to coast, with some of the largest wholesale discounts taking place in Florida, Texas, and the Carolinas.

Footnote:  Gasoline margins are substantially thinner than diesel, but the last month of 2014 continues to provide some of the widest profits in a generation. The week ending December 15 saw average gross margins of 38.1cts gal, up from a robust 33.6cts gal in the prior period. The current 30 day rolling average for motor fuel margins is just above 30cts gal, compared with 18cts gal in the same time frame one year ago.

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December 15, 2014
OPIS Survey: Gasoline Sales Snap Back after Sharp Drop

An exclusive OPIS survey of nearly 5,000 retail outlets nationwide reveals that gasoline demand was on the rise for the week ending Dec. 6.

According to OPIS data, average gasoline volumes were up by 4.7% week on week with 75% of the stations reporting an increase in volume. The most recent data set is about a 180-degree change from the previous week where an almost identical 75% reported a drop in volumes and the weekly average store volume was off by 5.2%.

The EIA reported a drop in gasoline demand that was greater than 9% week on week.

The month-to-month and year-to-year comparisons are a bit more modest.

OPIS data reveals that gasoline sales at the almost 5,000 stations in the survey were up 0.2% on average when compared to a month ago. Of those participating in the survey, just over 51% reported an increase in demand versus last month.
Versus one year ago, gasoline sales are up a fractional 0.3% with roughly 48.5% of the stations in the survey saying sales are higher.

The EIA in its weekly statistics reported an increase in gasoline demand of 2.4% when compared to a year ago.

The rolling four-week average according to OPIS data has come in to a 0.8% decline. However, there was a close to 50/50 split between stations reporting an increase in sales versus a decrease.

For more details on volume analysis by state, please contact Brian Norris at 301-287-2413.

December 11, 2014
Line Space Fees Becoming Part of Standard Petroleum Sales Practice

There was good news and bad news for East Coast marketers who pull product on the Colonial Pipeline this week. The "good news" came in the form of lower line space charges for the privilege of moving gasoline on the always allocated Colonial Line 1. Early last week, those fees ranged as high as 23cts/gal, thanks to the huge spread between New York Harbor and Gulf Coast gasoline prices. More recently, the line space premiums were quoted at 12-14cts/gal.

The bad news came in the form of confidential conversations between marketers and refiners. Several additional suppliers have told unbranded jobbers that they should expect to see line space fees added to formulae deals in 2015. Marketers are being told that the formidable cost of procuring incremental space looks like it will remain for some time, and refiners need to account for it in downstream sales.

OPIS noted exclusively last week that ExxonMobil canceled some unbranded contracts in November, thanks to the high cost of acquiring pipeline space needed to move barrels. The cancellations came in Plantation Pipeline markets, but sources believe that similar deals for Colonial Pipeline material will be discontinued in 2015. Almost concurrently, Motiva told multiple unbranded gas customers that it would begin charging a fee for line space on unbranded deals, beginning on Jan. 15. The charge will be 90% of the daily assessment of line space fees rendered by OPIS and Argus.

OPIS has now confirmed through customers that Citgo began levying a line space charge for unbranded sales on Colonial Pipeline in late October. The precise formula isn't known, but marketers say that virtually all of the daily fee has been passed along for rack deals tied to Gulf Coast spot numbers.

Sources say that Valero and Marathon have told Southeastern accounts of similar plans, although it is not known when the fees might be implemented. There are even reports that some refiners with terminals on Colonial or Plantation are looking at implementing a system where line space charges are figured into exchange fees and reconciliation.

In some cases, refiners are pulling out of Southeastern markets and concentrating on sending Gulf Coast gasoline to distant markets that fetch a higher price. Sources say that Phillips 66 is looking at pulling out of one Georgia terminal for this reason.

But more commonly, it is believed that deals sourced to the spot market will change if line space premiums remain a part of the East Coast landscape.
Marketers who purchase gasoline from TransMontaigne, for example, currently buy gasoline at a Gulf Coast gasoline reference plus a differential that reflects standard freight rates plus a modest markup. Those contracts expire at the end of April, and it's clear that any new deals will incorporate additional fees.

Become a better fuel buyer without ever leaving your desk –sign up now for the OPIS Basics of Fuel Buying eLearning course. Taught by 30+ year industry veteran Scott Berhang, this 11-module online training program will guide you through everything you need to know about purchasing physical fuel. Visit www.opisnet.com/events/fuel-buying-online.aspx or call our eLearning team toll-free at 888-301-2645 for more details and to get started.

December 9, 2014
EIA Forecasting Drastically Lower 2015 Retail Gasoline Price

In its recently released short-term energy outlook for December, the Energy Information Administration posted a sharp decline for 2015 retail gasoline prices compared to what it had been forecasting just one month ago.

Last month, the EIA opened some eyes when it had forecast that in 2015, retail gasoline prices would average $2.94/gal. In the December short-term energy outlook, those eyes that were opened last month may pop out with a retail price forecast of $2.60/gal next year.

The aggressive downward revision for the 2015 average is driven largely by falling crude oil prices according to the EIA. This year, retail prices are expected to average $3.37/gal when compared to last year's average of $3.51/gal. U.S. retail gasoline prices are expected to average $2.61/gal.

Should the U.S. average in 2015 come in at $2.60 as forecast, the nation's collective fuel bill would drop by about $100 billion, compared to a $3.37 annual average based on a demand figure of 8.8 million b/d.

EIA pointed out that Brent prices fell more than 15% in November, and OPEC deciding to keep quotas in place put more downward pressure on price expectations, it said. Meanwhile, EIA forecasts a $75 fourth-quarter average price for WTI and $63/bbl in 2015. The 2015 forecast is a $15/bbl drop from last month. EIA believes that the WTI-Brent spread will average $5/bbl next year.

Although the non-action by OPEC is believed to be targeted at U.S. shale procures, along with other higher-cost production, the EIA expects U.S. crude oil output to grow to 9.3 million b/d next year, a marginal 0.1 million-b/d decrease from a month ago.

The agency also believes that at some point, Saudi Arabia will cut production in 2015, but by a smaller amount than expected, with its current output of 9.6 million b/d trimmed back toward 9 million b/d through 2015. The Iraqi government deal on oil exports with the Kurdistan Regional Government earlier this month could help with exports from the north, but Iraq is described as a "major wildcard" in EIA's world production forecast.

Global consumption, according to the EIA, is expected to grow 1 million b/d this year, and 0.9 million b/d in 2015. The 2015 demand forecast is a downward revision of 0.2 million b/d from last month.

Become a better fuel buyer without ever leaving your desk –sign up now for the OPIS Basics of Fuel Buying eLearning course. Taught by 30+ year industry veteran Scott Berhang, this 11-module online training program will guide you through everything you need to know about purchasing physical fuel. Visit www.opisnet.com/events/fuel-buying-online.aspx or call our eLearning team toll-free at 888-301-2645 for more details and to get started.

December 8, 2014
OPIS Survey: Gasoline Volumes See Steep Thanksgiving Week Decline

An exclusive OPIS survey of nearly 5,000 retail stations nationwide reveals that weekly gasoline demand was off sharply for Thanksgiving week.

For the week ending Nov. 29, average gasoline volumes were off by 5.2% compared with the week prior. Of the stations participating, an overwhelming 75% of them reported gasoline volumes lower for the week ending the 29th. Among the stations that reported a decline in gasoline volumes, just over 39% of those retail outlets said volumes were down more than 10%.

Last week, the EIA said gasoline demand was up by 1.8% for the week ending Nov. 28.

Both the month-to-month and year-to-year comparisons are also showing a decline in overall volumes. When compared to a month ago, gasoline volumes are off by 5.4% at the almost 5,000 stations, and like the weekly numbers, almost 72% of the stations reported a decline in volumes.

When compared to last year, gasoline volumes were down by 2.9% at the close to 5,000 stations participating in the OPIS survey. A little bit more of an even split was seen between stations seeing an increase in volume and a decrease with 53.5% of the stations in the survey showing a decline in volumes.

Versus a year ago, the EIA said volumes are up by 6.2%.

The four-week volume average, according to OPIS data, was down 1.3% last week on a station-by-station basis.

For more information on volume analysis by state, please contact Brian Norris at 301-287-2413.

December 1, 2014
OPIS Survey: Volumes Step Up ahead of the Holidays

An exclusive OPIS survey of nearly 5,000 retail stations around the country shows that gasoline volumes were moving higher the weekend before Thanksgiving.

According to the survey, the week ending Nov. 22 saw gasoline volumes increasing by roughly 0.8% versus the week prior. Of the nearly 5,000 stations participating in the survey, about 54% of them said that volumes were higher week on week. The EIA, for perspective, had gasoline demand up 0.7% week on week.

The month-to-month and year-on-year comparisons have also flipped to positive growth, according to the exclusive survey. On a month-to-month basis, gasoline volumes were up 0.11% and similar to the weekly volumes, about 54% of the stations in the survey said gasoline demand was higher.

Gasoline volumes compared to last year were on average 0.87% higher, the survey revealed. Once again, nearly 54% of the survey participants recorded volume growth versus last year. While the OPIS survey shows volume growth inside of 1%, the EIA's implied demand number was almost 4% higher than it was a year ago.

The four-week rolling average, though, still shows declining demand as the average store volume was down 0.8% for the same four weeks when compared to a year ago. There is close to a 50-50 split on stations showing demand growth versus declines.

This most recent survey ran through Nov. 22, and next week's should give an even better indication of Thanksgiving travel.

For more details on volume analysis by state, please contact Brian Norris at 301-287-2413.