Umbrellas, Gasoline, Banks and the NY Harbor Contracts

As revealed by the recent disruptions from refinery closures, pipeline limitations and problems with barge delivery induced by Hurricane Harvey in the U.S Gulf Coast, there is an embedded premium in holding a physical commodity as opposed to a futures contract.

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The refinery shutdowns had impacts, particularly on the September nymex gasoline futures, which jumped to two-year highs.

A mini- price squeeze has occurred and forced the “shorts” – the selling side of the NYH Gasoline futures contract that needs product to satisfy its obligation – into offsetting their futures position at higher prices.