Midwest Gasoline Extends Rally as Explorer Delays Strain Supply

Midwest gasoline extended its gain for a second day, rallying to the highest level versus futures since 2008, as a delay on Explorer Pipeline Co.’s line spurred concern that supplies will fall further in the region.

The Explorer line, which transports gasoline, diesel and jet fuel to the Midwest from the Gulf Coast, can take as few as 11 days to carry a barrel, according to the company’s website. Shipments are delayed this month because demand has exceeded the company’s expectations.

“We haven’t been full in five years so this caught us a little off guard,” Tom Jensen, vice president of operations, said in a phone interview from Tulsa, Oklahoma.

Conventional, 87-octane gasoline in Group 3 gained 21 cents to 52.5 cents a gallon above New York Mercantile Exchange futures at 2:35 p.m., the highest level since Sept. 12, 2008. Group 3 is the region north of Tulsa, Oklahoma, to Minnesota and North Dakota. Conventional, 85-octane, or CBOB, in Chicago weakened 3 cents to a premium of 27 cents versus futures.

Gasoline supplies in the Midwest, or PADD 2, dropped 1.34 million barrels to 48.7 million in the week ended May 3, the lowest since Nov. 30, according to U.S. Energy Information Administration data. That’s a third consecutive weekly decline.

Stockpiles may be declining as refineries including Exxon Mobil Corp.’s Joliet, Illinois, site and BP Plc’s Whiting, Indiana, plant conduct maintenance.

“You’ve got all your refinery work and low inventories going on and demand is up so everyone is scrambling to make their supply,” Jensen said.

The 3-2-1 crack spread for Group 3 refiners, a rough measure of refining margins based on West Texas Intermediate in Cushing, Oklahoma, gained $6.93 to $41.10 a barrel, the highest level since October, according to data compiled by Bloomberg. The same spread in Chicago advanced 42 cents to $35.08 a barrel.

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