California-blend gasoline in Los Angeles fell from the highest premium to futures in almost two years after a buyer was able to secure gasoline to cover commitments for prompt delivery.
Los Angeles Carbob’s premium fell 13.5 cents to 33 cents above gasoline futures traded on the New York Mercantile Exchange at 3:58 p.m. East Coast time, according to data compiled by Bloomberg.
The fuel jumped 23 cents Aug. 26 to the highest premium since Sept. 9, 2009, as supply tightened after Exxon Mobil Corp. (XOM)’s Torrance refinery had an equipment breakdown and Kinder Morgan Energy Partners LP (KMP) shut a pipeline for the second time in a week.
“You saw an extreme example of a short squeeze,” said David Hackett, president of energy consultant Stillwater Associates in Irvine, California. “A company sold gasoline for delivery on the next cycle and couldn’t find someone to sell to him to cover his contractual obligation to his buyer. The diffs come off as soon as the short is covered.”
Carbob in San Francisco also fell 13.5 cents to a premium of 33 cents over futures.
Bob van der Valk, an independent fuel pricing analyst in Terry, Montana, described the tight market as “a classic squeeze” on buyers trying to cover pipeline tenders the week before Labor Day weekend.
Kinder Morgan started a 10-inch, products pipeline in northern California last week that was shut earlier after a reported “seep,” Emily Mir Thompson, a spokeswoman for the Houston-based company, said in an e-mail.
The same line, traveling from Kinder’s Concord station to its Bradshaw terminal in Sacramento, California, was shut earlier in the week after the company found a “minor leak.”
Chevron Corp. (CVX)’s 279,000-barrel-a-day El Segundo refinery, south of Los Angeles, said it plans to flare gases until 11:59 p.m. local time tomorrow. The flaring isn’t associated with a breakdown, the San Ramon, California-based company said in a notice to air regulators.
Rod Spackman, a company spokesman at the refinery in El Segundo, declined to comment on the plant’s operations.
Houston-based ConocoPhillips (COP) said its 147,000-barrel-a-day Wilmington refinery, also south of Los Angeles, plans to flare until Sept. 4. The refinery told state regulators that it began flaring gases over the weekend and was investigating the cause of the incident.
Janet Grothe, a Conoco spokeswoman in Houston, declined to comment on the refinery’s operations.
Conoco has also shut a 16-inch crude-oil pipeline delivering feedstock to its 128,000-barrel-a-day Rodeo refinery in northern California. The company is making repairs on the line after a leak, Romelia Hinojosa, a Conoco spokeswoman, said in an e-mail today.
The premium for conventional, 87-octane gasoline in Portland, Oregon, was unchanged at 19.5 cents versus futures.
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