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Los Angeles CARBOB differential rolls higher on logistics, cargoes

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Platts Jet Fuel

Los Angeles CARBOB differential rolls higher on logistics, cargoes

The Los Angeles CARBOB differential rolled into a new year of trading ona high note Friday, moving about 15 cents higher as pipeline logistics loosen,cargoes arrive ready to load, and a refinery restarts from a power outage.

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The differential had ping-ponged all week as traders weighed highinventory against renewed export demand.

S&P Global Platts assessed December-delivery barrels of theCalifornia-specific gasoline grade at NYMEX January RBOB minus 11 cents/galThursday, exactly where it was Tuesday after dropping the day before to minus17 cents/gal and the day after to minus 15 cents/gal.

The differential was heard done for January barrels at NYMEX FebruaryRBOB plus 1 and then plus 3 cents/gal Friday, where it was assessed for whatwould be about a 15-cent gain when accounting for the NYMEX basis monthcontango roll.

San Francisco CARBOB has seen similar gyrations, and has been assessed ata 2-cent premium to Los Angeles. Market sources said Shell was restarting its156,400 b/d Martinez plant near San Francisco after a power outage Thursdaynight.

One trader said the boost is not as stark as it looks for Januarybarrels, and was baked into the trade for weeks. The late December barrels donot carry a typical storage option, making them less desirable in the currentmarket glut.

"The West Coast is a disconnected market. Pipeline barrels get strandedtoward the end of the month," he said. "There is also a lot of summer gradelikely going into tank. Big Canadian and Los Angeles turnarounds in Q1, plusMexican demand is strong. So fundamentally, it makes sense."

Two of at least four MR-sized vessels sent from Mexico have arrived inLos Angeles ready to load, according to cFlow, Platts trade-flow software.Two more 300,000 barrel-capacity ships were expected to arrive in SanFrancisco: the Vukovar on Friday, and the Torm Arawa on Christmas.

"It makes sense," a shipping source said of Mexico demand. "The SouthAmerica market has firmed quite a bit."

Mexico regulators said Andeavor, the former Tesoro, started in October toship gasoline to northwestern Mexico, where it won access to Pemex storage andpipelines this year.

The ships were likely loading gasoline, due to the recent price declinesattributed to refiners selling off high inventories. Los Angeles CARBOB onMonday tested resistance at its lowest level since November 21, 2016, when itwas also minus 17 cents/gal. The previous low was minus 26 cents/gal onFebruary 23, 2016. The differential typically trades at a premium to theNYMEX, with a 2017 average of plus 10.44 cents/gal and a high of plus 29.75cents/gal on November 3.

US Energy Information Administration data released early Wednesdayshowed West Coast gasoline stocks increased 260,000 barrels week on week to 31million barrels for the week ended December 15, which was also 9.3% above lastyear's level. It was last this high on February 10 at 31.13 million barrels. "When everything is running on the USWC this time of year, they are longgasoline so its inventory has reached 31 million barrels, prices have tankedand opened up the opportunity for Mexico to buy from the USWC," said AndyLipow, president of Lipow Oil Associates.

California Energy Commission data released Thursday showed refinerystocks of CARBOB in the state at 6.23 million barrels, up 0.8% week on weekbut 12.7% higher than year-earlier levels. Non-California gasoline stocks,typically exported to neighboring states and other countries, dropped 1% to1.4 million barrels, which was 44.3% higher than last year. Stocks of blendingcomponents like alkylate and benzene were 27.2% higher year over year at 6.45million barrels.

Total gasoline and blendstock inventory came off its highest levelof the year in the CEC data, and remained near five-year highs for the period.

--Matthew Kohlman, matthew.kohlman@spglobal.com--Silvia Struthers, silvia.struthers@spglobal.com--Edited by Derek Sands, derek.sands@spglobal.com