U.S. Midwest gasoline strengthened against futures to the highest level in more than five months as area inventories slumped amid work at local refineries.
Stockpiles of motor fuel in the Midwest, the PADD 2 region, tumbled 1.34 million barrels, or 2.7 percent, to 48.7 million in the week ended May 3, the lowest level since Nov. 30, according to Energy Information Administration data. It was the third consecutive decline.
“Inventories are uncharacteristically snug for this time of year,” Steve Mosby, vice president of supply consultant ADMO Energy LLC, said in a phone interview from Kansas City, Missouri. “We’ve had a really strong turnaround schedule.”
The premium for conventional, 87-octane gasoline in the Group 3, or Midcontinent, area widened by 4.5 cents to 24.5 cents a gallon versus New York Mercantile Exchange futures at 1:04 p.m., the strongest differential since Sept. 24, according to data compiled by Bloomberg. Conventional, 85-octane gasoline, or CBOB, in Chicago gained 3.5 cents to a premium of 16.5 cents a gallon.
Exxon Mobil Corp. (XOM) shut all operating units at the 238,000-barrel-a-day Joliet refinery on April 14 for several weeks of planned work. BP Plc (BP/) idled an alkylation unit at its Toledo, Ohio, plant for planned repairs, while crews at the Whiting, Indiana, refinery are replacing equipment. The two plants make up a combined capacity of 580,000 barrels a day.
The 3-2-1 crack spread in the Group 3 region, a rough measure of refining margins based on West Texas Intermediate in Cushing, Oklahoma, gained $2.67 to $33.52 a barrel, a seventh consecutive advance. Group 3 includes states north of Tulsa, Oklahoma, to Minnesota and North Dakota.
The same spread for refineries in Chicago widened $1.41 to $33.70 a barrel.
“These guys have been making great crack spreads and running the plants hard,” Mosby said. “So the turnarounds have been more extensive this time around. Whereas they normally might work on one unit here or there, we’re seeing more units go down simultaneously.”
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