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Gulf Coast Fuels Fall as Motiva Startup to Boost Supplies

Jan. 18 (Bloomberg) -- U.S. Gulf Coast fuels weakened on speculation the restart of a crude unit at Motiva Enterprises LLC’s Port Arthur, Texas, refinery will add to regional supply.

Motiva is restarting the 325,000-barrel-a-day crude unit at its Port Arthur facility after finishing pipe repairs, two people familiar with operations said. The pipestill is expected to be processing as much as 200,000 barrels a day by the end of the weekend, said the people, who asked not to be identified because the information isn’t public.

The unit will more than double the plant’s crude-processing capacity, adding to gasoline and distillate production along the U.S. Gulf Coast, where inventories of those products grew by a combined 4.66 million barrels last week as refiners processed 7.76 million barrels a day of crude and other feedstocks, the highest seasonal level in weekly U.S. Energy Information Administration data back to 1990.

Conventional gasoline for ethanol blending, or CBOB, on the Gulf Coast retreated 1.25 cents to 19.75 cents below futures on the New York Mercantile Exchange at 3:55 p.m., a fourth consecutive decline. Reformulated gasoline slipped 3 cents to an 18.25-cent discount, while ultra-low-sulfur diesel in the region fell 0.63 cent to 0.5 cent below heating oil futures.

“Seaway is open, Motiva is back up and running, and margins will be good enough for refiners to produce more,” Carl Larry, president of Oil Outlooks & Opinions, LLC, said in a phone interview from Houston. “There won’t be a supply issue with distillates.”

Seaway Pipeline

Refinery operations may remain at a high level as Enterprise Products Partners LP and Enbridge Inc.’s Seaway pipeline carries less-expensive oil from the U.S. Midwest to plants along the coast.

Stockpiles of distillates, including diesel fuel and heating oil, jumped 2.29 million barrels to 39.3 million in PADD 3, the highest level since Aug. 24, according to the EIA, a division of the Energy Department. Inventories of gasoline gained 2.38 million barrels to 83.8 million last week.

Enterprise Products Partners LP and Enbridge Inc.’s 500-mile Seaway pipeline, which transports oil from Cushing, Oklahoma, to Freeport, Texas, resumed full service on Jan. 11 after an expansion that boosted the line’s capacity to 400,000 barrels a day from 150,000 barrels, the company said.

The line previously carried imported crude north to Cushing, before Enbridge and Enterprise reversed the pipeline’s flows in May to deliver domestic oil to the Houston area. The expansion will draw supplies from the Midwest and Cushing, the delivery point for U.S. benchmark West Texas Intermediate, and allow Gulf Coast refiners to take advantage of higher margins.

Crack Spread

The 3-2-1 crack spread, a measure of refining profitability based on WTI in Cushing, advanced 30 cents to $19.52 a barrel at 2:24 p.m., while the same spread based on Light Louisiana Sweet oil sank 80 cents to $2.77 a barrel.

Conventional gasoline in the Midwest, or Group 3 region, advanced 0.25 cent to 23.25 cents below futures, a second consecutive gain and the narrowest gap since Dec. 19. CBOB gained 4.5 cents in Chicago to 22 cents below Nymex.

The discount of gasoline in Group 3 versus the Gulf narrowed to 7.88 cents. The spread had widened to 33 cents Jan. 8, the most since September 2008. Movements of products from the Gulf to the Midwest totaled 21.2 million barrels in October, down 16 percent from a year earlier, EIA data show.

Ultra-low-sulfur diesel fell 0.75 cent to 4 cents below heating oil futures in Group 3, compared with an advance of 1 cents to a 10.5-cent discount for the same fuel in Chicago.

New York Harbor

Reformulated gasoline slipped to the largest discount in nine months in the New York Harbor as European shipments of the motor fuel to the U.S. East Coast are expected to gain in the next two weeks, according to a Bloomberg News survey.

Traders and oil companies will charter 15 tankers to carry the auto fuel for the two weeks to Jan. 30 and another 12 will probably be hired, according to the median estimate in a survey of eight shipbrokers and traders specializing in the trade.

The vessels are called Medium-Range tankers, and the 27 booked or likely to be hired would be able to carry 999,000 metric tons of gasoline, or about 607,000 barrels a day.

RBOB for prompt delivery in New York Harbor lost 0.12 cent to 2 cents below futures, the lowest level since April 16, data compiled by Bloomberg showed. Ultra-low-sulfur diesel in the region advanced 0.5 cent to a premium of 4.88 cents over heating oil futures.

To contact the reporter on this story: Christine Harvey in New York at charvey32@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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