US gasoline prices begin seasonal rise as diesel prices fall

Cracking margins have outpaced coking margins across the US as refiners change specifications to make cleaner burning transitional and summer grade gasoline, an analysis from S&P Global Commodity Insights showed March 6.

US Gulf Coast margins remain supported by a heavy maintenance season which has cut regional utilization to 86.2% of capacity for the week ended Feb. 24, according to most recent US Energy Information Administration data. Total US refinery utilization for the week was 85.5% of capacity.

USGC WTI MEH cracking margins rose $2.57/b week-on-week to average $20.49/b for the week ended March 3, S&P Global data shows. USGC Maya coking margins rose $1.41/b to average $24.96/b in the same time frame, due in part to lower distillate prices as the heating oil demand season for much of the country winds down.

Retail gasoline prices rose for the week ended March 3 while diesel prices fell, according to real-time data compiled by GasBuddy.

"Gasoline and diesel will likely have a temporary break up, moving apart, diesel falling, gasoline prices rising for the next couple of weeks (or longer)," said Patrick De Haan, analyst with GasBuddy.

The nation's average price of gasoline rose 3.5 cents from a week ago to $3.36/gal on March 5, while the national price of diesel fell 4.6 cents in the last week, and now stands at $4.34/gal, 26.8 cents lower than a year ago, according to GasBuddy.

Part of the reason for rising gasoline prices is the switch to more expensive summer grade.

On March 6, Colonial Pipeline -- which carries USGC refined products to the US Atlantic Coast -- starts shipping cycle number 15. This means Gulf Coast CBOB and premium CBOB shifts from 14.5 RVP to 12.5 RVP, unleaded regular, RBOB and premium RBOB shift from 13.5 RVP to 11.5 RVP by using less cheap butane and more expensive reformates and alkylates as blendstocks to meet the lower, hot-weather RVP levels.

Platts heard transitional grades early March 6 at NYMEX April RBOB futures minus 28 cents/gal for CBOB, futures minus 16.25 cents/gal for unleaded regular, and minus 24.75 cents/gal for RBOB.

Platts is part of S&P Global Commodity Insights.

De Haan noted that the overall trend will remain upward through much of the spring, as gasoline transitions roll in across the country.

"By Memorial Day, most of the nation will have transitioned to their respective required blend of fuel, and gas prices could ease, but a $4/gal national average remains possible by then," he said.

VGO supplies seen tight for Atlantic Basin

The ban on importing Russian VGO has made supplies of the feedstock tight in the Atlantic Basin, according to Richard Joswick, head of global oil analysis at S&P Global Commodity Insights.

VGO is used by refiners as a feedstock to gasoline-making fluid catalytic cracking units, and gasoline cracks and VGO cracks are tracking together, Joswick said.

Joswick said that while the US has been able to "backfill VGO from other sources" Europe is now short VGO due to the ban.

According to US Customs data, US refiners imported about 165,000 b/d of VGO in February, displacing Russian barrels with those from Saudi Arabia, Mexico and Chile with destinations of the USGC and the US West Coast.

US Atlantic Coast refiners have not imported any VGO so far in 2023, Customs data shows, and lack of VGO feed stock have impacted prices.

"Gasoline cracks are going to spike up and that will pull FCC [fluid catalytic cracking] margins up and will start pull VGO prices up," Joswick said, adding that USGC rates are already ramping up.

However, due to shipping logistics there will be a time lag as higher gasoline cracks will give the signal for increased imports of VGO, which will cause price fluctuations for both gasoline and VGO.

USAC CBOB held a $19.30/b crack over Dated Brent for the week ended March 3, up from the $16.13/b the week earlier while USGC CBOB cracks versus Dated Brent rose to $15.22/b from $14.27/b in the same time period, Platts data shows.

USGC 0.5% sulfur VGO prices held a $12.33/b premium over ICE Brent for the week ended March 3, down slightly from the $13.50/b a week earlier, Platts data shows. USAC 0.5% sulfur VGO prices held an $11.58/b premium over ICE Brent for the week ended March 3, down from the $12.75/b the week earlier.