Rack to Retail Spread Analysis

Rack-to-retail (R2R) spreads, the difference between diesel prices at the fuel station and OPIS average prices, have been narrowing over the past few months in response to rising prices. Right now spreads are around 30 cents, which has been roughly the average over the past few years. Of course, Iran and Venezuela have been the two major market factors during that period, causing NYMEX fuel prices to rise. Retail stations are slow to pass on those higher prices to consumers, causing the R2R spreads to narrow.

As we move into summer driving season the general market consensus is continued higher prices over the summer (many banks have increased their summer crude forecasts to $5-10 above current levels, which equates to an additional 10-20 cents for fuel), so don’t expect any major factors to cause a steep decline in prices and increase R2R spreads. Assuming diesel prices stay in the same $2.20-2.30 area, expect spreads to stay roughly in the 25-35 cent range.

Market Condition Report - Disclaimer
The information contained herein is derived from sources believed to be reliable; however, this information is not guaranteed as to its accuracy or completeness. Furthermore, no responsibility is assumed for use of this material and no express or implied warranties or guarantees are made. This material and any view or comment expressed herein are provided for informational purposes only and should not be construed in any way as an inducement or recommendation to buy or sell products, commodity futures or options contracts.

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