A booming spot market for Los Angeles CARB diesel has spurred talk of distillate imports to the West Coast, just months after the region reached a near-record level of exports.
The differential for the California grade of ultra low sulfur diesel was assessed Wednesday at NYMEX December heating oil futures plus 40 cents/gal, its highest level since December 11, 2006. It was heard done from plus plus 39 cents/gal down to plus 34 cents/gal Thursday morning.
On October 24, the spot market was assessed at plus 8.5 cents/gal, just above a high mark for August when distillate exports from the West Coast at 4.76 million barrels touched levels last seen in 1993. The differential spike came in the last six trading days as an outage at Chevron's Los Angeles refinery added to already low output due to fall turnarounds.
"Los Angeles and San Francisco are the most expensive distillates on the planet right now," said one trader who exports US distillates. "And just this summer we did see barrels from the USWC into Mexico and Latin America."
Now, he said, it appears that an arbitrage is open from Singapore to the West Coast, although Singapore specs would bring a premium.
A second source who handles cargoes said he was looking to place a cargo out of South Korea, then added, "but normally I should be buying. It's weird." He added that the big trading houses are likely all eyeing the same play.
"We have not seen any diesel imports ... yet," a third source said. "But the arb is wide open." He added that a gasoline cargo appeared to have discharged this week in Los Angeles, and gasoline experienced a similar spike to diesel after the Chevron FCC outage began. The unit is expected to be down for two more weeks. Los Angeles CARBOB was heard traded down 2 cents Thursday morning to NYMEX December RBOB futures plus 31 cents/gal.
Gasoline imports are not atypical on the US West Coast, at roughly four cargoes a month, according to US Energy Information Administration data.
Distillate imports, however, peaked at 2.1 million barrels in March 2007, then dropped sharply after that year to about one cargo a month, EIA data showed. Only 227,000 barrels imported to the West Coast in August 2011, the latest reporting month.
The import possibility may not remain open long as the market expects supply to increase. Los Angeles CARB diesel for delivery in December were heard done at NYMEX January heating oil plus 8 cents/gal on Thursday.
