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Repairs at Exxon's Joliet support Buckeye CBOB, widen spread to West Shore

Houston — Repair work at ExxonMobil's 238,600 b/d refinery in Channahon, Illinois,that was planned for March has begun in February, encouraging a wider spreadbetween CBOB on the West Shore Pipeline and on the Buckeye Complex in Chicago,Midwest market sources said Tuesday.

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In late December, US market sources, including a source familiar withrefinery operations at Joliet, told S&P Global Platts that the company wasplanning repair work in 2018 for Joliet's crude distillation unit. Theserepairs were scheduled to begin in March and last about 45 days.

But on Tuesday, US market sources indicated these CDU repairs may alreadybe underway at Joliet. "We hear their crude unit is down. It has had ongoingproblems since December" and "I think they moved the work up" as a result, onesource said.

A second market source agreed, saying that the CDU's output, and, byextension, refined product production, currently appear to be running belowtheir typical levels at Joliet.

On February 2, Exxon Joliet notified Illinois state regulators of flaringcaused by "equipment prep," which may have been part of preparations forrepairs on the CDU. On Tuesday, Tricia Simpson, a spokeswoman for ExxonMobil,confirmed that Joliet began planned maintenance on February 1. She did not saywhy the Joliet repair work was moved from March to February.

The first two market sources also said that the ahead-of-schedule repairsat Joliet are a key factor behind a trend that has puzzled market participantsin Chicago all month: persistently wide spreads between CBOB on the West ShorePipeline, Badger Pipeline and Buckeye Storage Complex. On Tuesday, CBOB on the West Shore pipeline was heard traded at futuresminus 12 cents/gal, Wolverine Pipeline CBOB was heard traded at futures minus5.50 cents/gal and Buckeye Complex CBOB was heard done at futures minus 3.50cents/gal.

Platts does not keep historic data for these spreads, but most of thetime, Buckeye CBOB seems to maintain a premium of 4 cents or fewer above WestShore CBOB.

The second market source said that in the spring of 2017, a section ofthe West Shore Pipeline carrying CBOB from the Milwaukee area to Greenway wasshut. Other sources have said that with this pipeline segment shut, supplyingGreen Bay with West Shore CBOB usually involves some trucking, which explainswhy West Shore CBOB almost always trades at a discount to other pipelines.

But now "spreads are super wide ... because [Exxon Joliet] is down inconjunction" with this pipeline segment, the second source said. "Joliet makesa lot of Illinois-compliant BCX grade gasoline," he added.

The first market source agreed that because Joliet is a key supplier toBuckeye, the downed crude unit there is supporting CBOB differentials on thatstorage system to a greater extent than other pipeline differentials in thearea.

--Seth Clare, seth.clare@spglobal.com

--Emmanuel Belostrino, emmanuel.belostrino@spglobal.com

--Janet McGurty, janet.mcgurty@spglobal.com

--Edited by Annie Siebert, ann.siebert@spglobal.com