Gulf Coast reformulated premium gasoline plunges amid the end of the driving season

The US Gulf Coast premium RBOB gasoline outright price plunged on Aug. 21, dragging down alkylate and raffinate prices amid lower demand as the end of the summer and the start of the blending season approach.

The premium RBOB outright price fell 10.97 cents/gal on Aug. 21 to $2.2963/gal, the lowest since Jan. 8 in the second day of cycle 49, which is the last cycle of summer grades assessments for reformulated gasoline on the Gulf Coast.

The differential against the NYMEX October RBOB futures contract fell 7.75 cents/gal to a nine day-low at plus 24.50.

Platts will start assessing the 11.5 RVP RBOB and premium RBOB on Aug. 27, with the start of the 50th Colonial Pipeline cycle.

RBOB fell 75 points to futures plus 10 cents, and the high-low octane spread for reformulated grades narrowed 7 cents to plus 14.5 cents/gal, the lowest since Dec. 13, 2022, when it was at plus 11 cents/gal.

Labor Day, on Sept. 2, marks the end of the US driving season, when demand is expected to start declining. Last year, US product supplied for finished motor gasoline — an implied measure of demand -- fell 1.014 million b/d between the week ended Sept. 1 and Sept. 8, according to the Energy Information Administration data.

During the week ended Aug. 16, implied demand rose 148,000 b/d, or 2% to 9.193 million b/d, higher than the same time last year when it was 8.910 million b/d, according to EIA data. Total US gasoline stocks dropped 1.606 million barrels, to 220.597 million barrels, the lowest level since the week ended on Nov. 24, 2023, when they were 218.184 million barrels.

"I think the RVP transition partially explains the draws; however, the decline in the past couple months has been much quicker than normal," a trader said.

The price drop for reformulated grades comes in anticipation of the winter-grade RVP transition in the Atlantic Coast, which is set to take effect on Sept. 6 for 13.5 RVP premium and regular RBOB delivered via New York Harbor barges.

Differentials for regular 7.4 RVP RBOB NYH barges reached a 2024 high of futures plus 6.90 cents/gal on Aug. 9, but have fallen every day since Aug. 12 amid lower demand.

One Atlantic Coast source said they were "watching gas get taken to the woodshed" on Aug. 21 amid the latest drop in NYH barge differentials.

Impact on gasoline blendstock prices

In line with the end of the summer specifications, the price for the 92 octane 5 RVP alkylate barges, which is the main octane booster for premium RBOB grades, fell 15.75 cents to futures plus 30 cents/gal. Additionally, 60 octane 4 RVP raffinate barges, an ultra low-sulfur, low-RVP heavy naphtha-like component used on reformulated blends, plunged 27 cents to futures minus 40 cents/gal.

Also on the Gulf Coast, the price of isobutane in Mont Belvieu, the main reference for alkylate feedstock, was unchanged for the second day at $1.0975/gal. The introduction of the summer season brought in price volatility for the NGL. Isobutane closed at a six-month low on June 21 at plus 103.25 cents/gal before jumping back up to a two-month high on July 8 at plus 133.50 cents/gal. In the last week, the price experienced marginal changes as it fluctuated between plus 109.25 cents/gal and plus 109.75 cents/gal.

The transition to higher volatility will allow blenders to incorporate more butane and light naphtha into gasoline.

Activity on the butane refinery grade usually restarts by September, and Platts assessed such spread at minus 19.75 cents, unchanged since June 5.

On the other hand, light naphtha, also known as natural gasoline, fell to a three-week low in Mont Belvieu. Platts assessed the price of the NGL down 2.375 cent to $1.43625 cents/gal. The price has been on a downtrend since Aug. 15.

Blending dynamics are also anticipated to change in Canada, where in addition to more gasoline blending, light naphtha intake from Canadian crude oil blenders is anticipated to start increasing around early October, marked by an increase in seasonal inventories, a Canadian NGLs analyst said.

Midwest demand falls after EPA fuel waiver

In the Midwest, a decrease in RBOB demand was caused by an Environmental Protection Agency fuel waiver recently extended to cover regional supply shortages from the recent Exxon Mobil Joliet refinery power outage on July 15.

The waiver, which allows refiners in eight Midwestern states to distribute 9 RVP RBOB instead of the current, lower 7.4 RVP RBOB, was initially issued for Aug. 1 to Aug. 20, but was extended through Sept. 1.

Market activity for reformulated grades in the Midwest has been thin, with wide bid/offer ranges for regular RBOB.

In Chicago, the RBOB/CBOB spread on BCX and generics product stood at 14 cents on Aug. 21, which is 22.40 cents lower compared with the year-ago period, while the premium RBOB/RBOB spread remains at its highest level since June 24.

As a reference for the Midwest NGLs Conway isobutane spread against Mont Belvieu product closed on Aug. 21 at plus 8 cents/gal, with Conway closing at $1.1775 cents/gal. The spread has been stable since the beginning of August, when it was at plus 7 cents/gal, before widening to 8 cents/gal on Aug. 16, establishing a more stable spread last year. Platts data showed price volatility between the two terminals in August 2023, with the lowest price recorded at minus 1.75 cents/gal, and the highest at plus 17.75 cents/gal.