Oil & Gas
Added Mar 31, 2021

Case study: Early warning for financial traders

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On Thursday September 25, 2020, Vortexa detected a diversion of reformate away from New York.  Tanker Challenge Prospect 2, chartered by Repsol and lifting out of Tarragona, changed destinations and instead of crossing westbound across the Atlantic, delivered its cargo to Amsterdam.  The move was consistent with volatility in the TA gasoline arb, which had gone negative September 18-22.  At that time, we estimated imports of gasoline and blending components that would be arriving to PADD 1 ports during the EIA week ending October 2 would average 712,000 barrels per day - a sharp 40 percent increase versus the prior week.

Our intelligence brief to clients noted:  “The reformate diversion, tighter TA arb and extra cargoes already en route could foreshadow a slowdown or reversal in the recent East Coast mogas inventory draw, depending on how regional demand and pipeline arrivals from PADD 3 influence the outcome.”  In other words, our intelligence was signaling a weakening market and downside price risk.

Indeed, in its report for the period ending October 2, the EIA reported an increase in PADD 1 gasoline inventories to 61.5 million barrels from the previous week’s 59.8 million barrels.

At the time clients accessed our forward-looking data -- ten days prior to the EIA data release - -front-month RBOB futures contracts were trading around 121 cents per gallon. From a simple flat-price perspective, our clients had an opportunity to “sell the high” in anticipation of lower prices.  Beginning on September 28, RBOB began falling, reaching a near-term low of about 112 cents per gallon on October 2.  

While the total price decrease during this short period – 7.5 percent – was far from severe, it did afford Vortexa clients an advantage, while other market participants - unaware of the looming market weakening - would have been disadvantaged. 

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