Will the US' 'M' gasoline be dead like the mummy? Some say yes

Me: "Let's talk about prices at the pup."

My many critics: "Don't you really mean prices at the 'pump,' doofus?"

No, in this case I really do mean prices at the pup. Why? No "M."

Why so glum, chum? Maybe because unfinished gasoline is nudging finished gasoline out of the dog bed that is oil. (Photo by Sara Butler)

The venerable M-grade, a benchmark in the gasoline trade for decades, soon would lose some of its influence under a change proposed by the nation's largest pipeline, Alpharetta, Georgia-based Colonial. The company, citing feedback from users in Houston last week (February 1), intends to drop M-grade gasoline from its shipping schedule.

It's said around the Platts office that J.P. Morgan — the person, not the bank — used to trade M-grade gasoline when he wasn't giving shiny dimes to tots. It influences the price of gasoline going to Mexico. It influences the price of naphtha going to South Korea. It probably influences the price of Flamin' Hot Cheetos at your local Chevron gas station.

According to a story by Platts' Amanda Rayborn, much less M-grade has been shipped on the pipeline system compared with the last few decades. Colonial, the nation's largest and busiest pipeline, links the Houston area to North Carolina via gasoline-only 1.37 million b/d Line 1, and then to New Jersey via 885,000 b/d refined products Line 2.

What's the beef with M? (Source: Nero-Film)

The pipeline used to have more "M" than the word "mummydom." These days there's no timeline for dropping M-grade, a product that has seen a considerable decline in shipping volume, according to Colonial officials.

These are, indeed, tumultuous times for the 87-octane M-grade gasoline. Colonial earlier announced plans to drop M-grade at 7.8 RVP from the shipping schedule, meaning the cash markets will shift focus to the more widely traded 9 RVP gasoline this summer. The 7.8-RVP M-grade was the basis for multiple futures contracts, so that sector of the market will have to alter its trading profile starting soon.

There are signals the grade still matters. Market talk points to considerable blending of M-grade into RBOB blendstock once it reaches the northernmost point of Line 3 at Linden, New Jersey. That's right — finished gasoline is turned back into blendstock. It's like turning cupcakes back into flour, but it works in the energy markets.

It's hard to get a handle on how much M-grade is shipped on Colonial, with that data regarded as proprietary. A good rule of thumb is that there are at least three barrels of CBOB blendstock in the cash gasoline market for every barrel of M-grade gasoline.

And don't get me started on V-grade. Colonial told shippers late last Friday that V-grade at the lowest-traded RVP, 7.8, might be dropped from the summer shipping schedule. Its fate is being decided separately from M-grade.

For now, it is still relevant. With the "V."

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	US Marketscan provides you with a daily market overview of the major refined products in the United States delivered via e-mail. It carries spot prices for all key products traded in the US market. Gasoline, heating oil, jet fuel, residual fuel and naphtha prices are listed for the Atlantic Coast, Gulf Coast, Group 3, Chicago and West Coast markets. Each issue also includes insightful market commentary.