CME enforces RBOB delivery for October contract

OREANDA-NEWS. September 30, 2016. CME group says only RBOB can be delivered against the October RBOB Nymex contract, meaning a regulatory waiver related to the recent Colonial pipeline outage does not apply to Nymex deliveries.

The Environmental Protection Agency (EPA) allowed a waiver to allow conventional gasoline deliveries to areas that usually require RBOB but faced supply shortages following nearly two weeks of disruption to Colonial pipeline's Line 1. The waiver applies to states from Alabama up to New Jersey and is effective from 16 September through October 6.

But the waiver does not apply to deliveries against the October Nymex contract, CME said. This was a revision of an earlier announcement on 23 September, where CME said the EPA waiver did apply to Nymex deliveries.

In order to make the change from allowing conventional gasoline deliveries to enforcing RBOB deliveries, CME declared Force Majeure, a term that enables a rule change relating to the terms of futures contract delivery. CME's definition of Force Majeure is somewhat different from Force Majeure as it's used by the broader oil industry, which usually refers to an "act of God" that prevents a party from fulfilling a contract, said Dan Brusstar, senior director of energy research at CME.

Atlantic coast RBOB supplies are plentiful enough that the grade has been trading at a discount to CBOB, a blendstock for conventional gasoline. Prompt RBOB on the Buckeye pipeline averaged 0.15?/USG below CBOB in the past week, according to Argus assessments.