The highest-octane blendstocks in the US Gulf Coast cash market for barges each found three-year-plus lows Thursday on the back of refiner and trade house selling and high inventory.
S&P Global Platts began the assessments for alkylate and reformate in December 2012.
In a soft, oversupplied market, alkylate FOB Houston for late July fell 9.25 cents/gal to Colonial Pipeline 87-unleaded plus 13.75 cents/gal on an offer 25 points higher.
"There is just way to much juice out there," a US refined products source said.
Gulf Coast refiner Total was heard to sell an alkylate barge at 16 cents over gasoline, and trade house Mercuria was heard to have a barge of alkylate on offer Thursday afternoon. Marathon was heard to have alkylate on offer, but withdrew that position and used the product for gasoline blending instead, market sources said.
The assessment trumped the record low set April 4-5 at 15 cents over the basis contract and pointed to some renewed buying interest for bargain hunters.
On hearing of the offer, one US blendstocks trader said that if it's "14 cents over, I'll go buy some right now. I'm short. My tanks are empty."
Meanwhile, the reformate assessment fell 50 points to a record 27.5 cents/gal over pipeline gasoline on stout inventory in the Houston Ship Channel. Thursday marked the seventh time in 2016 that the reformate assessment set a record low.
"There are still millions of barrels of alkylate and reformate in the tank," a second US refined products source said. "I don't see how these folks are going to move that out before the RVP cliff in September."
Gasoline markets move to backwardation in late summer as strict summer pollution standards, the Reid Vapor Pressure requirements, are eased. That means the value of blendstocks such as alkylate and reformate, which are priced off gasoline, typically lose value. And that is expected to trigger a selloff of excess blendstocks in tanks, sources said.
US Energy Information Administration data released this week showed that blendstocks inventory on the Gulf Coast rose for third consecutive week in the week ending July 8. Stocks of "other components," the category including reformate and raffinate, rose 744,000 barrels to 27.465 million barrels. Inventory is running about 2 million barrels above where it a year ago.
The drop in the alkylate value Thursday suggested a return to profitability in blending. Qualitative blend values as assessed by Platts Thursday indicated a potential profit on blending for the first time in July.
The potential gain for adding alkylate to 87-unleaded was 3.14 cents/gal Thursday, compared with a potential loss of more than 10 cents/gal as recently as Tuesday.
Platts assesses alkylate at maximum 93 octane and reformate at maximum 110 octane, with 100-octane product the most typically traded reformate in the market. Market sources said gasoline blenders stocked up on both when outright prices were low last winter and early in the spring.
