UGSC finished regular gasoline price rises amid supply constraints

Houston — US Gulf Coast finished regular differential jumped 4.40 cents/gal to NYMEX April RBOB futures minus 9.25 cents/gal, amid lower availability of prompt material to send to the New York Harbor area.

The finished regular gasoline to be shipped on Colonial Pipeline shipping cycle number 14 was heard traded 3 cents below cycle 13 material, since Thursday was the last day to schedule finished grade for cycle 13.

"It has been a crazy week across the board," a trader said.

"Obviously folks are short in finished regular grade," a broker said.

"They are short on finished grade on scheduling day," a second trader said.

The support likely came from the FCC outages heard along the week.

"Support on prices is more due to Bayway, Chevron-Pasadena, Lyondell, Shell-Convent. I think Baton Rouge is pretty much restarted and the Citgo outage was brief," another trader said, citing recent refinery outages, which have supported higher gasoline prices.

The month-long unplanned outage of the 145,000 b/d FCCU at Phillips 66's 258,000 b/d Bayway refinery in New Jersey pulled more gasoline than usual up the Colonial Pipeline into New York Harbor as Friday begins the last shipping cycle on the Colonial Pipeline for 13.5 RVP gasoline. RVP will drop to 11.5 with the next cycle, Cycle 14.

On Wednesday, market sources said Shell reported a problem with a 46,000 b/d reformer at the plant over the weekend. Reformate is used to increase octane in gasoline and is necessary for transitional and summer grade gasoline, which needs lower RVP.

"It is just too many refining units down," the same broker added.

"It seems to be more issue with the finished grade than CBOB," a second trader said, since the US Gulf Coast CBOB differential added only 1.50 cents/gal, to be assessed at futures minus 16.50 cents/gal.

Market sources said that the 502,500 b/d ExxonMobile's Baton Rouge refinery has an important production of regular finished gasoline and the run cuts after the fire could be adding support to the finished grade more than any other.

Friday will be the first day of the last cycle to ship 13.5 RVP material through the Colonial Pipeline. Since March 10, just 11.5 RVP material will be allowed in the system.

"I would think some refiners could switch plans and make more 13.5 RVP finished regular," another trader commented.

The Energy Information Administration data showed Thursday a 196,000 b/d increase in the total gasoline demand, measured as product supplied, for the week ended February 14. The demand level was 8.9 million b/d, a level close to the average for the last five years at this time of the year, but 118,000 b/d higher than a year before.

The strong demand shifted the structure for the next six Colonial Pipeline shipping cycles for CBOB and regular finished gasoline into backwardation on Wednesday for the first time since November 25, 2019, according to the historical S&P Global Platts data.

A backwardated structure on Colonial Pipeline shipping cycles supports the perception of a stronger interest in the prompt material than in the next weeks.