Sparta in action: How Sparta called the RBOB Oct/Nov spread rally

How Sparta called the RBOB Oct/Nov rally before it ran

In late August, the Oct/Nov RBOB futures spread was sitting near seasonal lows.

The spread was at 18.84.

Sparta flagged regional supply trouble building underneath the surface.

Three weeks later, the spread had added over 10 points.

This is what we saw, when we saw it, and how Sparta users were positioned before the move.

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Setting the stage on 31 August: spread soft, but the supply picture already tightening

Oct/Nov RBOB spread: 18.84

On the surface, the spread looked unremarkable.

Underneath, Eastern Canadian flows were drying up and PADD 1 turnarounds were about to bite into an already tight inventory picture.

What Sparta saw

1. Eastern Canada flows disappearing into a tight PADD 1

Sparta flagged planned downtime at Irving’s Saint John refinery from mid-September, cutting marginal supply into PADD 1 just as inventories were already stretched.

2. Import economics stayed shut all summer

Sparta’s RBOB New York Harbor Pricing Centre view tracked import arb margins through the summer. They stayed negative for the duration, keeping import volumes below year-ago levels and removing a source of downside pressure on US gasoline.

As Sparta wrote: “Regional supply trouble, with a lack of marginal flows from Eastern Canada and turnarounds in PADD 1, amid an already tight inventory picture, points towards further upside for Oct/Nov RB futures spreads, despite potential pressure that may arise from open USGC export opportunities.”

3. USGC export optionality wasn’t enough to cap it

Open export opportunities out of the Gulf Coast gave the market a release valve, but not enough to offset the tightening from closed imports and shrinking regional supply.

What happened next: the spread ran

By 21 September:

Oct/Nov RBOB spread: 18.84 → 28.85

(RBOB Oct/Nov spread, 31 August to 21 September)

The spread gained over 10 points in three weeks.

The result

Call made: 31 August at 18.84

By 21 September: 28.85

When import barrels stay away and regional supply tightens, spreads move. Sparta’s Pricing Centre view flagged it before the screen caught up.

What happened next: the spread broke lower

By 24 August:

Sept/Oct ICE GO: $55/mt → $43.50/mt

The spread moved $11.50/mt lower in six days.

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