U.S. gasoline in Chicago weakened versus futures as Midwest inventories improved following a shortage that sent differentials to a record high in June.
Conventional, 85-octane gasoline, or CBOB, in Chicago slid 3 cents to 13.5 cents a gallon below futures traded on the New York Mercantile Exchange at 2:35 p.m., according to data compiled by Bloomberg.
The spread weakened as BP Plc restarted a crude distillation unit at the Whiting, Indiana, refinery and Citgo Petroleum Corp. returned the Lemont, Illinois, plant to planned rates following a June 28 malfunction.
Magellan Midstream Partners LP said inventories are improving in the central region of its system. The company, which implemented allocation in the Midwest on May 16, only has “a few terminals” still affected by the program, said Bruce Heine, a company spokesman based in Tulsa, Oklahoma.
Spot prices in Chicago rallied to a record premium of 85 cents versus Nymex futures in early June, when refineries including Exxon Mobil Corp.’s Joliet plant and Phillips 66’s Wood River site were undergoing maintenance. The plants, both in Illinois, have a combined capacity of 594,000 barrels a day, according to data compiled by Bloomberg.
Since the refineries have returned from maintenance, gasoline stockpiles in the Midwest, the area known as PADD 2, have climbed to 49.9 million barrels, up from a five-month low of 47.6 million barrels in May, according to Energy Information Administration data.
The 3-2-1 crack spread in Chicago, a rough measure of refining margins for gasoline and diesel based on West Texas Intermediate oil in Cushing, Oklahoma, dropped $1.05 to $14.84 a barrel. The same spread in Group 3, which includes states north of Oklahoma to Minnesota and North Dakota, gained 10 cents to $16.29 a barrel, according to data compiled by Bloomberg.
Ultra-low-sulfur diesel was at a discount of 1.5 cents a gallon in Chicago and 0.38 cent a gallon in Group 3. The same fuel weakened 0.3 cent on the Gulf Coast to 2.82 cents a gallon below Nymex futures.
The Gulf Coast discount grew after a Bloomberg survey of shipbrokers showed traders will book 11 medium-range tankers for diesel to Amsterdam from Houston for loading in the next two weeks, unchanged from the previous survey. Five tankers were already booked, compared with six last week, the survey of six respondents showed.
Refineries in the region, known as PADD 3, ran at about 93 percent of Gulf Coast capacity last week, contributing to a build of 1.06 million barrels to 40.5 million barrels of distillate, according to the EIA, the Energy Department’s statistical arm.
“Our runs are so high, we’re producing way more distillate than we can consume,” Tom Finlon, director of Energy Analytics Group Ltd, said by phone from Jupiter, Florida. “We need to export as much as we can to prevent some serious accumulation on the Gulf.”
Finlon forecasts that exports will maintain their pace in the next week and may drop off later when European refineries boost utilization rates and don’t require as much product.
Refinery throughputs in Europe are expected to post year-over-year declines due to lower runs in the middle of 2013, the International Energy Agency said in a June report.
The 3-2-1 crack spread on the Gulf, based on WTI, fell 13 cents to $12.08, while the same spread for Light Louisiana Sweet oil increased 27 cents to $5.38 a barrel.