U.S. Midwest gasoline weakened from the highest level on record on speculation that shipments being sent to the region will help to relieve a shortage.
Conventional, 87-octane gasoline in Group 3, which stretches from Oklahoma to Minnesota and North Dakota, slipped 16.5 cents to 47.5 cents a gallon over New York Mercantile Exchange futures at 2:39 p.m. Wholesale terminal prices averaged $3.51 a gallon in Tulsa, compared with $2.91 in the Dallas region, according to data compiled by Bloomberg.
The differential between Gulf Coast rack prices and those in the Midwest is spurring wholesalers to buy gasoline in Gulf Coast region cities like Dallas and transport it by truck to markets as far away as Colorado, said Mark Anderle, a trader at wholesaler Truman Arnold Cos. in Dallas.
Supplies of gasoline in the U.S. Midwest, known as PADD 2, fell to 47.8 million barrels in the week ended May 10, the lowest since Nov. 30, according to U.S. Energy Information Administration data.
“Supply is tight in Chicago and the Group,” Anderle said. “It’s normal to be this low on stock this time of year. But because the spreads are so much bigger this year, you’re able to come from a bigger distance.”
Trucks have driven longer distances to find supplies after shipments on Explorer Pipeline Co.’s Explorer line were delayed because of larger-than-expected demand. The Explorer pipeline, which transports oil products to the Midwest from the Gulf Coast, can take about 11 days to deliver a barrel to the Chicago region, according to the company’s website.
Conventional, 85-octane gasoline, or CBOB, in Chicago gained 2 cents to a premium of 37 cents to Nymex futures, the highest level since Aug. 30, according to data compiled by Bloomberg. Refineries including Exxon Mobil Corp.’s Joliet, Illinois, plant may be contributing to limited area inventories as the site conducts planned maintenance.
The 3-2-1 crack spread in Chicago, a rough measure of refining margins based on West Texas Intermediate in Cushing, Oklahoma, advanced $1.84 to $40 a barrel, the highest in more than seven months. The same spread in Group 3 dropped $4.41 to $40.79 a barrel, the first decline in five days.
Gasoline in Chicago was at a premium of 57.28 cents to the Gulf Coast. Conventional, 85-octane gasoline, or CBOB, on the Gulf, dropped 1.75 cents to 20.25 cents a gallon below futures. The conventional, 87-octane grade slipped 1.5 cents to a discount of 11.75 cents a gallon.