U.S. Gulf Coast fuels strengthened relative to futures as allocations along Colonial Pipeline Co.’s main lines signaled strong demand for the region’s supplies, and as Citgo Petroleum Corp. shut a unit in Louisiana.
The discount for conventional, 85-octane gasoline, or CBOB, narrowed 0.25 cent to 21.75 cents a gallon versus futures on the New York Mercantile Exchange at 4:05 p.m. New York time,, according to data compiled by Bloomberg. Ultra-low-sulfur diesel weakened 0.13 cent to trade 4.13 cents a gallon below ULSD futures.
Colonial, operator of 5,500 miles of pipelines originating in Houston and ending in Linden, New Jersey, on the New York Harbor, allocated shipments on Lines 1 and 2. When a company allocates shipments, it means demand to send barrels has exceeded the line’s capacity. Citgo also shut a reformer for planned work in Lake Charles, Louisiana.
There has been “strong pipeline flow from the U.S. Gulf as pipeline space has been allocated,” said Tom Finlon, director of Energy Analytics Group Ltd., who is based in Jupiter Beach, Florida.
That may have drawn from supplies along the Gulf, where a government report showed that inventories of gasoline slipped 1.16 million barrels to 77.2 million barrels in the week ended Aug. 2. Supplies the previous week were at a six-month high, according to the Energy Information Administration.
Conventional, 87-octane gasoline in New York Harbor gained 0.75 cent to a discount to futures of 3.75 cents a gallon, while reformulated gasoline, or RBOB, gained 0.5 cent to a 3.63-cent premium.
Gasoline inventories on the U.S. East Coast rose to 61.7 million barrels, the highest since July 12, the EIA reported in its weekly release. Imports to the region fell to 584,000 barrels, while refiners in the area, known as PADD 1, processed 1.1 million barrels a day of crude and other feedstock, the lowest level since March 22, according to the EIA.
“It’s quite surprising to see a drop in imports, which are needed to maintain Northeastern supplies, and a gain in overall regional stocks in the same week,” Finlon said. “This is clearly feeding the drop in gasoline structure.”
The 3-2-1 crack spread in the New York Harbor, a rough measure of refining margins for gasoline and diesel based on Brent oil in Europe, slid to $15.72 a barrel, the lowest level since July 3, according to data compiled by Bloomberg.
The same spread on the Gulf Coast, based on West Texas Intermediate oil in Cushing, Oklahoma, retreated to $10.88 a barrel, while the margins based on Light Louisiana Sweet oil slipped to $5.43.