Midwest Gasoline Strengthens on Wood River Refinery Upset

U.S. Midwest gasoline strengthened versus New York futures after Phillips 66 reported a unit upset at the area’s second-largest refinery.

The discount for conventional, 85-octane gasoline, or CBOB, narrowed 1.5 cents to 17 cents a gallon under futures at 2:39 p.m. on the New York Mercantile Exchange. Conventional 87-octane gasoline in Group 3 gained 2.75 cents to a discount of 7.25 cents, the smallest spread in two weeks. Group 3 includes states from Oklahoma to the northern U.S. border.

The discounts narrowed after Phillips 66 flared gases because of a unit upset at its 356,000-barrel-a-day Wood River, Illinois, refinery. The plant is the second-largest in the Midwest behind BP Plc’s 420,000-barrel-a-day Whiting refinery in Indiana. When a plant reports an upset, it can cause prices to rise because operators may need to purchase more supply.

The 3-2-1 crack spread in Chicago, a rough measure of refining margins for gasoline and diesel fuel based on West Texas Intermediate in Cushing, Oklahoma, widened 33 cents to $15.63 a barrel. The same spread in Group 3 grew 77 cents to $19.56 a barrel, according to data compiled by Bloomberg.

The spread between gasoline in Chicago and the Gulf Coast was 6.85 cents, the smallest since June 26. Conventional CBOB gasoline was unchanged on the Gulf Coast today at 25.75 cents a gallon below futures.

An inventory report may show tomorrow that U.S. supplies of gasoline surged 1.8 million barrels last week, according to the median estimate of 11 analysts in a Bloomberg survey. The U.S. Energy Information Administration will provide inventory data at 10:30 a.m.

“All eyes are on the report tomorrow,” said Jason Schenker, president of Prestige Economics LLC in Austin, Texas.