Chicago gasoline weakened versus futures to the narrowest differential in more than a month after Magellan Midstream Partners LP eased allocations in the central region of the U.S. and Exxon Mobil Corp.’s Joliet, Illinois, refinery returned from work.
Conventional, 85-octane gasoline tumbled 12.5 cents to 12.5 cents a gallon above futures on the New York Mercantile Exchange at 4:05 p.m., the lowest since April 17 and the seventh consecutive decline, according to data compiled by Bloomberg.
The spread narrowed after Magellan, which operates nearly 30 inland terminals in the U.S., removed “several” storage sites from an allocation program that began May 14. Allocation, which occurs when demand exceeds capacity, is still in place at “certain” terminals, said Bruce Heine, a company spokesman based in Tulsa.
Exxon’s 238,000-barrel-a-day Joliet refinery completed a plantwide turnaround that began in mid-April and included the shutdown of all operating units, the company said.
The maintenance, which may have taken longer than expected, probably triggered recent increases in the spot market and led to a shortage of supplies last month, Patrick DeHaan, an analyst at GasBuddy.com, and Steve Mosby, vice president of supply consultant ADMO Energy LLC, said in past interviews.
Inventories climbed 855,000 barrels to 49.2 million barrels in the week ended June 7, after falling to the lowest level since November last month, according to U.S. Energy Information Administration data.
The 3-2-1 crack spread in Chicago, a rough measure of refining margins based on West Texas Intermediate in Cushing, Oklahoma, slid $4.61 to $28.30 a barrel, according to data compiled by Bloomberg.
Gulf Coast spot gasoline strengthened after a government report showed inventories fell to the lowest level in a month as more product was sent via pipeline to the Midwest and Northeast.
Stockpiles of motor gasoline on the Gulf Coast, referred to as PADD 3, slipped 1.44 million barrels to 75.6 million last week, the lowest level since May 10, according to U.S. EIA data.
“This kind of decline should be expected in June,” Tom Finlon, director of Energy Analytics Group Ltd., said in a phone interview from Jupiter, Florida. “You’re supposed to have strong flow through pipelines up to the East Coast and Midwest around this time.”
Conventional, 85-octane gasoline, or CBOB, on the Gulf weakened 0.5 cent to 13.75 cents a gallon below futures on the Nymex at 4:24 p.m. The conventional, 87-octane grade also decreased 0.25 cent to a discount of 10.5 cents.
Gulf Coast prices have been supported as refiners and blenders sent gasoline via Explorer Pipeline Co.’s Explorer line to the U.S. Midwest, where refinery shutdowns curtailed supply and pushed gasoline prices in Chicago as much as 85 cents over the Gulf June 3, and to the U.S. East Coast on Colonial Pipeline Co.’s line.
Also, a fluid catalytic cracker remained offline at Marathon Petroleum Corp.’s Texas City, Texas, refinery.
“I’d imagine that’s also having an impact on the market,” Finlon said today.
Colonial allocated shipments this week on Line 1, which runs from Houston to Greensboro, North Carolina, while the Explorer line was delayed in recent weeks due to higher-than-normal demand, according to the companies. Explorer carries gasoline and diesel from the Gulf to the Midwest.
A company issues an allocation when demand to ship fuel exceeds a line’s capacity.
The 3-2-1 crack spread on the Gulf, also based on WTI oil, dropped 44 cents to $19.99 a barrel. The same spread for Light Louisiana Sweet oil slid 69 cents to $10.84 a barrel, a second consecutive decline, according to data compiled by Bloomberg.