THE WALL STREET JOURNAL

Gasoline’s Intraday Gain Biggest in Eight Years

 

Move reflects the potential disruption to energy markets and the
volatility of gasoline trading


By STEPHANIE YANG / Nov. 1, 2016 2:45 p.m. ET


Tuesday’s spikes in gasoline prices marked the biggest intraday gain in eight years,
reflecting the potential disruption to energy markets and the volatility of gasoline
trading.


Futures for December delivery jumped as much as 15% from the prior day’s close,
trading up to $1.6351 a gallon, a five-month high, before retreating in afternoon
trading. Futures settled up 4.6% at $1.4841 a gallon.


The move came after the Colonial Pipeline, a key supplier of gasoline from the
Gulf Coast to the East Coast, shut down its main gasoline and diesel pipelines
following an explosion. Tuesday’s spike marked the biggest intraday gain since
Dec. 31, 2008, when gasoline rose 17%.


Gasoline traders are familiar with large price swings, which can be driven by
problems with delivery, refineries or weather. The sudden closing of a crucial
shipping route tends to cause exaggerated moves in the market, said Ric Navy,
senior vice president for energy futures at RJ O’Brien & Associate.


“Since Colonial was such an important delivery mechanism for products, shutting
it all down at all causes a lot of volatility,” he said. “It’s a very severe event.”


Gasoline also tends to see price spikes after energy prices fall sharply, as they did
at the end of 2008 following the collapse of Lehman Brothers Holdings Inc.
Gasoline pared gains later Tuesday after Colonial said the gasoline line is
scheduled to restart on Saturday, although plans may change as the company
awaits more information.


FUTURES AND OPTIONS TRADING INVOLVE SIGNIFICANT RISK OF LOSS AND
MAY NOT BE SUITABLE FOR EVERYONE. OPTIONS, CASH AND FUTURES
MARKETS ARE SEPARATE AND DISTINCT AND DO NOT NECESSARILY
RESPOND IN THE SAME WAY TO SIMILAR MARKETS STIMULUS. A MOVEMENT
IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE
RELATED FUTURES & OPTIONS CONTRACT BEING OFFERED. SEASONAL
DEMAND AND CURRENT NEWS IN COMMODITIES ARE ALREADY REFLECTED
IN THE PRICE OF THE UNDERLYING FUTURES.