Gasoline weakened in the Midwest as U.S. refineries processed the most oil for this time of year since 2004 amid a glut of supply and strong margins.
Refiners increased inputs and other feedstocks by 2.2 percent to 15.4 million barrels a day in the seven days ended Nov. 30, the fourth consecutive weekly advance, the Energy Department reported. Stockpiles of motor gasoline in the Midwest, known as PADD 2, gained 2.21 million barrels to 47.2 million, the biggest increase since January 2010, the data show.
U.S. refiners are processing more crude oil to take advantage of higher profit margins as domestic oil production has jumped to the highest level since 1994 and crude prices have fallen 11 percent this year.
Conventional gasoline in the Midcontinent, or Group 3 market, fell 1.75 cents to 14.63 cents a gallon below futures on the New York Mercantile Exchange at 2:35 p.m. Conventional gasoline for ethanol blending, or CBOB, in Chicago slipped 1 cent to a 12-cent premium to futures.
“There’s a lot more gasoline pouring into PADD 2,” said Lewis Adam, president of ADMO Energy LLC, a supply consultant in Kansas City, Missouri. “Refiners are enjoying a real windfall of margins because they’re able to access the domestic crudes.”
The 5-3-2 crack spread, a measure of refining profitability, for Midwest gasoline and diesel over West Texas Intermediate was $36.86 a barrel at 2:57 p.m., down from $41.64 yesterday. That’s still the highest for this time of year since Bloomberg began compiling the data in 2006 and almost triple a year ago.
“They have every incentive to run as hard as they can,” Adam said in a phone interview today.
Ultra-low-sulfur diesel in Group 3, which stretches from Oklahoma to Minnesota, gained 0.25 cent to 1.13 cents a barrel over heating oil futures on Nymex, while the fuel retreated 1.25 cents to a premium of 10.50 cents in the Chicago region.
Supplies of distillate fuel, including heating oil and diesel, rose 871,000 barrels to 25.2 million in the Midwest, the first gain in four weeks. Even with the increase, stockpiles are hovering at the lowest seasonal level since 2006.
Midwest refineries have the capacity to process as much as 3.71 million barrels a day, according to Energy Department data compiled by Bloomberg. BP Plc’s Whiting refinery, the largest plant in the region, continues to operate without its biggest crude unit as work is under way.