Houston vacuum gasoil barges at all sulfur levels fell 25-50 cents/b Thursday with diesel and gasoline cracks mixed against region-dominant Louisiana Light Sweet crude.
The crack for a barrel of ULSD against LLS fell 20 cents to a year-to-date low at $6.41/b. Meanwhile, the crack for unleaded 87 against LLS rose $1.75 to a seven-month high at $16.09/b.
Diesel could find support in coming weeks as atypically cheap Gulf Coast barrels are shipped to Midwest markets, a US refined products broker said. A stronger diesel crack would lend support to feedstocks markets.
"I've never seen it this cheap, and it doesn't look to be done, but [it] should find support on the up/down" arbitrage from Houston to Group 3 in Tulsa, Oklahoma, and Chicago markets, the broker said.
The arrival of Gulf Coast refiner-produced distillates could take Midwest product to historically low levels seen in 2015, he said.
Platts on Thursday assessed Gulf Coast ULSD at the NYMEX April ULSD futures contract minus 10.25 cents/gal, down 2.25 cents/gal. The differential has fallen nearly 4 cents/gal in the week as traders eye the revolving door of the trans-Atlantic arbitrage, which opened up for the second time in a week on Wednesday.
The differential for ULSD has been falling as its stocks hover near record-high levels. US Energy Information Administration data showed Gulf Coast ULSD stocks rose 1.62 million barrels in the week that ended March 18 to 43.28 million barrels, the third-highest total on record.
Meanwhile, low-sulfur VGO CIF Houston fell 50 cents Thursday to cash April WTI plus $6.35/b, down 50 cents on the back of a sale to Exxon Mobil in New Orleans at that level, with the New Orleans market considered level to Houston's.
High-sulfur VGO fell 25 cents to crude plus $4.55/b, down 25 cents on a trade heard CIF Corpus Christi with ATMI selling to Koch.
Thursday marked the first time since March 1 that the differential for low-sulfur VGO had fallen. The feedstock had been on a bull run from low values for VGO at all sulfur levels in the first six weeks of 2016, with the dip attributed to heavy import flow from Northwest Europe, Scandinavia and the Baltics. High-sulfur VGO went as low as 1 cent below cash crude on March 1.
High-sulfur VGO is fed into a refinery hydrocracker to make gasoline and diesel, while low-sulfur VGO goes into a fluid catalytic cracker to produce naphtha for reforming into gasoline, according to energy consultant RBN Energy.
