Houston alkylate barges rose Thursday on isobutane finding a 2.5-year high over butane and an uptick in the spread between premium and regular unleaded gasoline in the Gulf Coast cash trade, with market sources saying they see the end of a summer-long blendstocks slump ahead.
Meanwhile, naphtha -- which is deployed in gasoline blending among its many uses -- fell on refiner selling, and high-octane reformate was talked by market players in a wide range. Chicago premium gasoline was heard stronger on a shortage of blendstocks there.
"It seems like the market is cleaning itself up," a US blendstocks trader said. "We're seeing inventory draw down, and we have some refineries going into turnaround very soon. So all of this has the blendstocks perking up a little bit, I think."
Alkylate and reformate found numerous 3.5-year lows this summer. The assessments began on December 3, 2012.
Some market players predicted alkylate found find record-low single digit premiums to 87-octane gasoline, but it got as low only as a 12-cent spread August 9-17.
TRUMPING THE 10-DAY AVERAGE
Since then, it has risen to 22 cents over pipeline in the Thursday assessment across a span of 22 trading days. The differential has beaten its 10-day average for six consecutive trading days ending Thursday.
"It seems like alkylate keeps ticking up, with the occasional oddball low number," a US refined products broker said. "It's been making a lot of little moves lately."
But the shutting of Colonial Pipeline Line is likely to cut support for blendstocks, a US refined products trader said. Pipeline operators said Thursday that they were likely to restart the gasoline-only line next week beyond the original anticipated restart during the weekend.
"Octane is pretty strong," a US refined products trader said. "Ultimately with this Line 1 situation, refiners are going to have to cut runs to stay in containment, which means they will quit producing octanes."
Late Thursday afternoon after the S&P Global Platts Market on Close assessment process, offers for alkylate barges were heard as low as 21 cents over pipeline gasoline. Meanwhile, reformate was talked as high as pipeline gasoline plus 41 cents/gal, well above the assessment at a 33-cent spread.
TRACKING THE OCTANES
Meanwhile, the spread between Gulf Coast premium and regular gasoline blew out on concerns about an octane shortage in the market. Premium conventional was assessed 15.75 cents/gal over its 87-octane counterpart for the widest spread since July 19.
Premium regrades are also strong in the Midwest, where octane is traditionally less plentiful. Premium RBOB's spread over regular RBOB was assessed at 60 cents/gal, the widest it has been since November 2, 2015. A Midwest gasoline broker said octanes were "in very tight hands lately." Gulf Coast isobutane spiked to its highest premium over normal butane in more than two years Thursday as market sources were mixed on the reason for the price jump.
PART OF THE ALKYLATE BREW
An ingredient for alkylate saw strength in the cash trade Thursday. Non-Lone Star Terminal isobutane, reflecting prices at the Enterprise terminal in Mont Belvieu, Texas rose 3.5 cents to 73.75 cents/gal, its highest outright value since March 2015. Its premium over normal butane, which had been flat or near flat earlier this month, spiked to 7.875 cents/gal. Isobutane had not climbed to a larger premium since February 2014.
One market source suggested the price jump was due to short covering with blenders switching to winter grade gasoline and someone failing to shift earlier. Another market participant suggested it was due to refiner alkylate demand.
"I would assume it's increased octane demand for winter gasoline blending across all refiners," the source said. "[It's] a seasonal pull."
The assessment for Platts specification-standard naphtha, which at soft differentials has become an attractive gasoline blend, fell 75 points to barge gasoline minus 27.75 cents/gal on a Phillips 66 offer for a barge of 50,000 barrels of product September 20-22 at Houston or Beaumont, Texas.
