US Gulf Coast refined product prices ahead of Hurricane Ida

US Gulf Coast refined product prices on Aug. 27 jumped to multi-month highs as Hurricane Ida was heading north across the Gulf of Mexico to oil and gas production and manufacturing facilities along the USGC.

Ida was upgraded on Aug. 27 from a tropical storm to a Category 1 hurricane with expectations it would strengthen to a major Category 3 storm before making landfall along the Louisiana coastline on Aug. 29 or Aug. 30 – the 16th anniversary of the deadly Hurricane Katrina which decimated the New Orleans area.

Buyers, fearing the possible impact from Ida on regional refining assets, jumped into the market pushing some cash prices to the highest levels seen in months, supported by a fall in inventories levels reported in the most recent Energy Information Administration report.

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Futures benchmarks also rose with NYMEX September RBOB settled up 1.88 cents at $2.2742/gal and September ULSD climbed 2.60 cents to $2.1092/gal.

ULSD nears four-month high

The Gulf Coast diesel market jumped to a near four-month high on the first day of the prompt 50th shipping cycle ahead of the Hurricane Ida making landfall on the Gulf Coast this weekend.

S&P Global Platts assessed ULSD on the Gulf Coast at the NYMEX September ULSD futures contract minus 4.55 cents/gal, up 35 points/gal from the previous day. This marks the highest the Gulf Coast diesel market has been since May 12, when it was assessed at the same level.

This ends a highly liquid week on the market, where more than 500,000 barrels of ULSD on the Gulf Coast traded in the Platts Market on Close assessment process since Aug. 24.

On its current path, Ida looks to reach landfall between Lake Charles and New Orleans, two major refining hubs on the Gulf Coast. Although missing both at this time, it's still possible for the storm to do damage to either city, one Gulf Coast broker said.

"If the New Orleans area floods, it could be bad for some refiners on the river," the broker said. "If Lake Charles floods it is the same thing. But right now it's aimed right between the two."

While total US ULSD inventories rose to 126.46 million barrels for the week ended Aug. 20, EIA data showed USGC stocks drew by 100,000 barrels to 42.57 million barrels.

USGC stocks of jet fuel also dropped, falling to 16.25 million barrels from the 16.44 million b/d the week earlier, according to EIA data.

Jet fuel on the Gulf Coast was also up by 75 points/gal from Aug. 26 to be assessed at minus 21.75 cents/gal. This marks the highest it's been since April 27, when levels were seen at prompt-month futures minus 21.55 cents/gal. The USGC jet differential also rose to minus 21.75 cents/gal compared with the front month NYMEX ULSD futures contract on Aug. 27, up from the minus 22.50 cents/gal on Aug. 26

Gasoline markets gain traction

Gasoline markets were also buoyed by the impending storm, as the outright price of unleaded 87 rose 2.23 cents/gal to $2.2171/gal although the differential between the front month NYMEX RBOB dipped by 50 points to 9.75 cents/gal on Aug. 27 from Aug. 26.

However, both CBOB and RBOB both rose 2.88 cents/gal each to $2.21546/gal and $2.1481/gal, respectively, with differentials to the front month RBOB gaining 15 points on the day to 3.50 cents/gal and 2.85 cents/gal, respectively.