With apparent ample inventory in Ship Channel tanks, Houston reformate barges traded Wednesday at levels below the lowest assessment since S&P Global Platts began publishing data on the blendstock in late 2012, market sources said.
Several US refined products sources said reformate FOB Houston for late June traded at Colonial Pipeline 87-octane gasoline plus 35 cents/gal, compared with the record-low assessment at 35.75 cents/gal over gasoline May 19-24. Platts began assessing reformate in December 2012.
Market sources said blenders bought more reformate and other blendstocks such as alkylate in the winter and early spring when the gasoline basis for those products was at six- to seven-year lows. Gasoline market players have been slow to draw off that inventory with opportunities for profit difficult to identify, the sources said.
"I've thought we hit the bottom about every week so far," a US blendstocks source said. "But this market defies gravity. This [the trade at 35 cents/gal over gasoline] has to be us bouncing off the bottom. Gasoline basis has strengthened, so more reformate came out on offer."
Reformate has established a ceiling of 40 cents/gal over gasoline in June, last topping that threshold May 31. In contrast, the blendstock averaged a premium of 69.74 cents/gal to gasoline in summer 2015.
PREMIUM VS. REGULAR
The soft reformate market is reflected in a tight spread between premium and regular gasoline in Gulf Coast markets, with reformate among the products used to boost gasoline to 93 octane. The gap is expected to narrow further.
The higher-octane gasoline is averaging a 14.51 cents/gal advantage over 87-octane gasoline FOB Pasadena, Texas, so far this year, compared with a spread of 22.37 cents/gal in the same period in 2015.
"Those should get even tighter, those octane spreads," a US refined products broker said.
US Energy Information Administration data supports the storyline of high reformate inventory. The category that includes reformate, "other gasoline blending components," has averaged stocks of 28.65 million from April 1 through the week ending June 10, compared with 25.91 million barrels in the same period last year.
Market sources have pointed to anecdotal evidence of large blendstocks inventory in storage along the Houston Ship Channel at Kinder Morgan, Magellan and Enterprise properties.
Meanwhile, the influence of soft reformate is seen in other light ends markets. Gulf Coast normal butane, also known as C4, has been stronger this spring as unseasonably cheap reformate has allowed for more of the high-RVP, high-octane NGL in the summer gasoline blending pool, market sources have said.
Butane has an RVP of 50 to 60, so it is typically in higher demand for blending in the winter when US and state regulations allow for higher-RVP gasoline in most markets. In contract, Platts assesses reformate at 1 RVP.
BUTANE STRONGER AGAINST RBOB FUTURES
Non-LST butane, reflecting prices for June delivery at the Enterprise terminal in Mont Belvieu, Texas, was trading at 63 cents/gal Wednesday morning, nearly at parity to Tuesday's assessment. Generally it is unseasonably stronger in relation to gasoline. It averaged 54.3 cents/gal, or 26% of RBOB futures, in the first half of June 2015 and 63.7 cents/gal, or 40% of gasoline, so far this month.
