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USGC alkylate matches highest since Dec 2012 at 65 cents over pipeline gasoline

Houston — Gulf Coast alkylate barges on Tuesday matched a record differential to Colonial Pipeline gasoline in a market reacting to driver demand and refiners holding onto their blendstocks.

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Alkylate is used to boost octane for premium gasoline and reduce RVP for summer fuels. High-octane gasoline has seen strength this week in the Gulf Coast and Midwest gasoline markets on a scarcity of alkylate.

Platts assessed alkylate at maximum 5.5 RVP at 65 cents over pipeline gasoline for loading August 5, tying the record set on six days in February 2013. The assessment was based on a heard Gulf Coast barge trade completed late Monday.

Platts began the assessment in 2012.

Market sources said refiners have been holding alkylate in inventory that typically has reached the market. Tight conditions have prompted rare imports of the blendstock from Asia to the Gulf Coast.

"Those numbers are staying firm -- big numbers," a US refined products broker said. "The market must still be physically tight."

Spot market alkylate rose 4.38 cents to $2.3599/gal. The outright price had fallen or held six consecutive days before Tuesday.

Appreciating alkylate values were instrumental in boosting Gulf Coast pipeline-delivered premium, unleaded-93 gasoline with 9.0 RVP (V2) values.

The V2 differential rose 3.25 cents from Monday's assessment to stand at the NYMEX September RBOB futures contract plus 32 cents/gal, or $2.0615/gal outright.

During the Platts Market on Close assessment process, George E. Warren bid for 25,000 barrels of V2 at plus 32 cents/gal without seller interest. Ultimately, the bid was withdrawn less than a minute before the end of the MOC process.

A Gulf Coast trading source attributed the higher values for V2 to the stronger alkylates and a "rally" in regular gasoline grades, particularly regular unleaded-87 gasoline (M2).

Trader-driven bidding saw M2 rise 3.25 cents from Monday to be assessed at the NYMEX September RBOB futures contract minus 3 cents/gal, or to $1.8155/gal outright.

Alkylate supplies are said to be tight in part of the Midwest products market, too.

In Tulsa, Oklahoma-based Group 3, the premium gasoline differential reached an all-time high against the suboctane benchmark Monday, supported by tight supply and refinery maintenance.

The differential for premium gasoline was assessed Tuesday at 75 cents/gal above suboctane for the second straight day. That marks the strongest spread between the two grades since the suboctane assessment was started in September 2013.

The differential for the underlying suboctane gasoline for Tulsa pipeline delivery fell 1.5 cents/gal to the NYMEX August RBOB futures contract minus 12.75 cents/gal, based on market indications.

The premium grade of gasoline maintained a higher spread despite the weaker suboctane levels because of a dearth of blendstocks supply in the area.

"It's just really tight there," a US broker said.

High-octane gasoline weakened in New York Harbor. The market for 9-RVP premium RBOB (H2) on the Atlantic Coast fell 3.3 cents Tuesday but remains steeply backwardated in the face of tight supplies for prompt delivery. Tuesday's differential for H2 fell to 50.7 cents above the NYMEX August RBOB contract, down from 59 cents last Wednesday.

One trade for NYMEX August RBOB plus 54 cents/gal was done on July 31, but one and two days later, it was offered at plus 50 cents/gal.

Market sources said high-octane gasoline is sliding as the East Coast's available supplies of alkylate, which were in high demand and strictly limited supply last week, have increased this week.

Driver demand has been another factor in their rise, with last week's federal government estimates indicating implied demand at its second-highest level ever. Statistics for the week ended July 24 will be released Wednesday.

--Jeffrey Bair,
--Amanda Rayborn,
--Joshua Brown,
--Keefe Borden,