U.S. Midwest gasoline strengthened as regional refineries reported power failures, threatening to tighten supplies that have increased four straight weeks.
Conventional, 85-octane gasoline, or CBOB, in Chicago gained 6.5 cents to 15 cents a gallon below futures on the New York Mercantile Exchange at 2:35 p.m., according to data compiled by Bloomberg. The discount shrank for a third day after reaching the widest level since March 1.
The discount for 87-octane gasoline in Group 3 narrowed 1 cent to 9 cents a gallon under futures, the first advance in 11 days. Group 3 includes states north of Oklahoma to Minnesota and North Dakota.
Regional discounts slimmed after Exxon Mobil Corp. reported an equipment failure at its 238,000-barrel-a-day Joliet, Illinois, refinery and as Flint Hills Resources LLC restarted units following a June 21 power outage.
Spreads may also be falling because the market found a “little bottom,” following recent declines, according to Steve Mosby, partner at ADMO Energy LLC, a supply consultant in Kansas City, Missouri.
Chicago gasoline has fallen 80 cents this month, compared with a 12.5-cent decline in Group 3, according to data compiled by Bloomberg.
The differentials tumbled after gasoline shortages were eased as Exxon returned units to service after a plantwide turnaround in Illinois. Magellan Midstream Partners LP also lifted several terminals from allocation program that was put in place May 16 due to higher demand amid low supply.
Stockpiles of gasoline in the Midwest, known as PADD 2, climbed 507,000 barrels to 49.7 million barrels in the week ended June 14, a fourth consecutive weekly gain, according to the U.S. Energy Information Administration.
The 3-2-1 crack spread in Chicago, a rough measure of refining margins based on West Texas Intermediate oil in Cushing, Oklahoma, slid 12 cents to $17.01 a barrel. The same spread dropped $1.85 to $19.03 a barrel in the Group 3 region.