US Gulf Coast RBOB strengthens amid refinery maintenance, shipping demand to USAC

New York — US Gulf Coast RBOB strengthened Tuesday as market sources pointed to increased shipping demand to the US Northeast and on the start of seasonal refinery maintenance in the region.

The RBOB differential against NYMEX March RBOB futures closed Tuesday at minus 5.75 cents/gal, 1.75 cents/gal higher than Friday. The spread between RBOB and CBOB widened to 2.15 cents/gal Tuesday, the widest spread for the winter 2019-2020 season.

One source suggested the market may be seeing fewer barrels of winter-grade RBOB.

"Guessing refiners making less 13.5 RVP RBOB since there was no real premium to 13.5 RVP CBOB," a market source said.

During the winter season, the quality for 13.5 RVP RBOB and 13.5 RVP CBOB is quite similar and so are prices historically.

"I do think the lack of refiners selling 13.5 RVP RBOB is a clear sign that refinery work has taken barrels out of the market," another source said.

Planned maintenance on the Gulf Coast atmospheric distillation units and catalytic reformers usually take place during the first quarter. Refiners need to adjust their operation before the start of the spring because of the gasoline quality restrictions during the warmer months. Spring material has a better quality than winter but lower than summer grades.

S&P Global Platts confirmed planned maintenance occurring at Citgo's CDU at Lake Charles, Texas; Motiva's FCC at Port Arthur, Texas; Shell's CDU at Norco, Louisiana; an unknown unit at Valero's Three Rivers, Texas, refinery; Phillips 66's CDU at Belle Chasse, Louisiana; and Phillips 66's CDU at Sweeny, Texas. Planned maintenance is also expected to start soon at an unknown unit at Delek Big Spring, Texas, and CDU maintenance at Exxon Mobil Baton Rouge, Louisiana.

In the last two years, Platts data showed that RBOB differentials start to strengthen relative to CBOB in the second half of December.

"Northeastern terminals need to switch from 15 RVP to 13.5 RVP so more people are shipping 13.5 RVP and refiners' make is the same," a third market source said.

The Colonial Pipeline guide for quality assurance in 2020 shows that the last cycle to ship 15 RVP RBOB through Line 1 is the eighth cycle. Currently Platts is assessing seventh cycle, which schedules Wednesday. The eighth cycle schedules January 29, which will be the last day to send 15 RVP RBOB through Colonial Pipeline Line 1.