Portland ULSD soared to its highest point in more than a year on weak local supply, a Midwest refinery disruption and the preternatural convergence of celestial bodies, market sources said Friday.
S&P Global Platts assessed the Portland ULSD market at the September NYMEX futures contract plus 15.50 cents/gal on Friday after the market was heard bid at plus 15 cents/gal -- a day-on-day increase of 1 cent/gal. After the Friday assessment period, the market was heard traded plus 17.50 cents/gal and offered plus 19 cents/gal. The market has been on a steep rise since Tuesday, gaining 7 cents/gal over that period.
The plus 15.50 cents/gal assessment marks the strongest the market has been since plus 16.50 cents/gal on July 7, 2016, and accounts for the largest four-day rise since December.
The move has solidified Portland as the most expensive ULSD market in the world, according to Platts data. Platts assessed the market at an outright price of $1.7896/gal Friday.
The impact has also been felt in gasoline. Suboctane gasoline in Portland climbed 3.75 cents/gal to be assessed at NYMEX September RBOB plus 21 cents/gal, its highest differential since April 4. The blendstock has climbed 12 cents/gal since August 1.
Market sources have credited a convergence of factors for the strengthening, notably an upset at Phillips 66's 66,000 b/d Billings, Montana, refinery.
Phillips 66 spokeswoman Melissa Ory said "there is no planned maintenance currently underway at the Billings refinery," but otherwise did not comment on daily operations. It's unclear what units have been impacted or when the refinery will be back to normal operations.
The refinery has a capacity of 35,000 b/d of gasoline and 25,000 b/d of distillate, according to the Phillips 66 website.
Sources said the disruption has opened an unusual West Coast-to-Rockies arbitrage and that "a lot of diesel has moved into the Eastern Washington, Eastern Oregon, Rockies area via barges ... down the Columbia River."
Another source said a major West Coast ULSD supplier had "oversold significantly" and "was out until further notice."
Market sources have tied the unusual ULSD demand in Portland to the 2017 solar eclipse. Oregon is in the path of the first total solar eclipse in 38 years to cross the continental US. Oregon officials estimate an influx of 1 million visitors to the state for several days surrounding the day of the eclipse, August 21. The Oregon office of Emergency Management has warned of "long lines for fuel."
With no clear end to the undersupply and a looming solar eclipse, sources said the market could strengthen further, potentially opening an arbitrage for diesel to move north to Portland from California.
"Things have been very tight the last three to four days and it's getting worse," a market source said.
