Refinery outages in Texas and Louisiana and the draw on US gasoline stocks drove up refined products values Wednesday and lifted the ULSD crack against Louisiana Light Sweet crude to a nine-month high.
Market-moving news landed nearly every hour from early morning into early Wednesday afternoon, keeping traders on edge.
"Days like today will make you drink," a US refined products source said.
Refineries in Baton Rouge, Louisiana (ExxonMobil); Convent, Louisiana (Motiva); and Port Arthur, Texas (Total) reported production problems, and a fluid catalytic cracker remained offline at the ExxonMobil plant at Baytown, Texas. California blendstock found a discount to futures, meanwhile, after market talk of refinery trouble earlier this week.
The crack for Colonial Pipeline ULSD against region-dominant LLS crude rose $1.71/b to $13.25/b, and the crack for pipeline 87-unleaded against LLS rose $1.85/b to a six-day high $12.59/b.
STRONGER CRACKS VERSUS NYMEX CRUDE
Futures cracks also rode the news upward. The front-month RBOB crack against NYMEX crude was $14.13/b, up from $12.70/b Tuesday. The RBOB crack also got support from Energy Information Administration data Wednesday showing US gasoline stocks fell 2.724 million barrels last week.
The ULSD crack against NYMEX crude was up 96 cents at $15.76/b Wednesday afternoon, even though nationwide distillate inventories built 1.939 million barrels.
Another boost to futures cracks came from EIA's estimate of US crude production increasing 152,000 b/d to 8.597 million b/d. Higher output kept a lid on NYMEX crude, which stayed mostly in negative territory Wednesday until the end of the trading day.
"I think there is a lot of uncertainty. ... [It's] hard to read this market," a Gulf Coast distillates trading source said about the cash trade.
Gulf Coast ULSD differentials rose and fell sharply during the day, and was assessed at minus 2.05 cents/gal on Wednesday, up 1.65 cents/gal on the day. That brings it to its highest differential since October 2014.
ULSD was heard to trade as high as minus 2.25 cents/gal early in the morning and down to minus 3.30 cents/gal in the afternoon, before trading as high as minus 2 cents/gal in the Platts Market on Close assessment process.
Heating oil values caught the bullishness as well, rising 2.50 cents from morning levels to be assessed at the NYMEX September ULSD futures minus 15.50 cents/gal. The upward move took place despite reports that the hydrotreater at Phillips 66's Alliance refinery was coming back online Wednesday -- an event that likely will add to Gulf Coast high sulfur heating oil supplies.
Gulf Coast conventional gasoline was assessed at NYMEX September RBOB plus 0.25 cent/gal, up 2 cents/gal from Tuesday's assessment.
BATON ROUGE IMPACT FELT IN EUROPE
The climb was almost entirely related to refinery issues along the Gulf Coast, though EIA data showed regional gasoline stocks fell for the third consecutive week last week.
Impact from the loss of the smallest crude unit at the ExxonMobil Baton Rouge refinery was felt as far away as Northwest Europe, where the outage was said to tamp vacuum gasoil differentials. Europe refiners often send surplus feedstock to US ports.
Bargain-hunting VGO traders stayed out the market Wednesday with ExxonMobil heard to have surplus feedstock from the Baytown plant on offer, market sources said.
"Of the two, the Baytown outage is the bigger deal," a US feedstocks market source said. "Anytime you see ExxonMobil in the market as a seller, that means VGO is probably going to be long."
ExxonMobil offers were attracting few bids, a US feedstocks broker said. The sweetest VGO assessed by Platts was unchanged Wednesday at September cash WTI plus $4.75/b with bids talked slightly lower.
'SO MUCH GASOLINE UP THERE'
US gasoline markets, especially New York Harbor, were well-positioned to deflect impact from this week's refinery issues in the Gulf Coast on the back of unseasonably high stocks, a refined products broker said. East Coast markets get three-fifths of their gasoline from Gulf Coast sources.
"There is so much gasoline up there, they are putting it in martinis," he said.
For example, since July 1 Mid-Atlantic gasoline stocks have averaged 37.08 million barrels, compared with 27.76 million barrels in roughly the same period last year and 30.38 million in 2014, US Energy Information Administration data showed.
Southern California low-RVP blendstock fell on a gasoline build after getting support from market talk of refinery outages earlier in the week. Los Angeles CARBOB dove a discount to the NYMEX and was heard to trade multiple times at NYMEX September RBOB minus 1 cent/gal, where it was assessed. That's down from 7.75 cents/gal over futures Tuesday.
