U.S. Gulf Coast spot fuels weakened relative to futures as fog restricted traffic on the Houston Ship Channel and a refinery in Texas increased rates for its largest crude unit.
Conventional, 85-octane gasoline, or CBOB, on the Gulf Coast slid 3.75 cents to 16.75 cents a gallon below futures on the New York Mercantile Exchange at 11:57 a.m., the biggest discount since Jan. 3. Ultra low sulfur diesel slumped 2.5 cents to a discount of 9 cents, a two-week low, according to data compiled by Bloomberg.
As of about 11 a.m. local time, 70 inbound and 20 outbound ships were waiting to pass through the channel, according to Matt Brock, dispatcher for the Houston Pilots. Heavy fog that’s not expected to lift until tomorrow may continue to restrict travel, he said.
“There is nothing moving at this point and it’s hard to predict when the fog will pass,” Brock said by phone today.
When weather prevents ships from traveling in or out of the channel, Houston-area refineries and operators of shipping docks may be limited in their ability to send and receive products including gasoline and diesel. Exxon Mobil Corp. (XOM) said yesterday it was experiencing minimal impact to operations at its Baytown, Texas, site, as a result of the fog.
Valero Energy Corp. (VLO)’s Port Arthur refinery, also in Texas, boosted rates on its largest crude unit and hydrocracker following repairs, adding to regional production.
The 250,000-barrel-a-day crude unit was reduced to 160,000 in the first week of February to fix a leak on a saturated-gas recovery plant, according to a a person familiar with operations who asked not to be identified because the information isn’t public.
Baytown and Port Arthur have a combined capacity of 894,000 barrels a day, data compiled by Bloomberg show.
People “can’t export when there is fog,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. Demand for Gulf Coast gasoline from the East Coast has also been limited because of weather, he said.
Consumption of gasoline typically declines during the winter when wet and icy roads limit driving. Demand averaged over the four weeks ended Feb. 7 was 8.36 million barrels daily, the lowest level for the time of year since 2012, according to Energy Information Administration data.
The 3-2-1 crack spread on the Gulf Coast, a rough measure of refining margins for gasoline and diesel based on West Texas Intermediate oil in Cushing, Oklahoma, slid $1.43 to $14.32 a barrel, a second consecutive decline. The same spread based on Light Louisiana Sweet oil, the Gulf Coast benchmark, dropped $1.33 to $9.17 a barrel, the lowest since Feb. 10, data compiled by Bloomberg show.
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