Recent Market News

Dallas-Fort Worth Retail Fuel Market Gripped by Panic Buying


August 31, 2017

The Dallas-Fort Worth retail gasoline market is gripped by panic buying, with long lines to pump gasoline seen at retail stations in that area, industry sources told OPIS on Thursday.

The Dallas-Fort Worth market, which receives significant fuel supply from the Houston and Corpus Christi refineries, is not receiving enough products from the south even though Explorer's 10-inch diameter pipeline from Houston to Dallas is operational, they said.

This restricted supply problem in Dallas is exacerbated by panic buying by drivers.

"The biggest storage capacity in Texas now is in the cars," a source in Dallas told OPIS. Dallas is now seeing drivers filling up their cars in response to concerns of supply run-outs. This panic buying trend was seen in Houston last week ahead of the incoming storm.

Dallas is continuing to receive fuel supplies from other alternative sources, sources said. Valero's McKee refinery is pumping to Dallas via Southlake pipeline, and the Tyler refinery is also sending fuel to Dallas.

Valero's Admore refinery is moving barrels to Dallas via trucks, they said.

Magellan reversed a segment of its pipeline to bring gasoline and diesel fuel from Oklahoma refineries to supplement the Dallas market due to a lack of supply from Houston-area refineries.

In Houston, retail stations have seen a significant slowdown in traffic in the aftermath of Tropical Storm Harvey.

OPIS notes that many drivers in Houston have filled their cars ahead of the storm, and many Houstonians are not driving to work this week. This contributed to retail fuel demand destruction during and after the storm.

However, fuel supply issues at the retail pumps could arise next week if people in Houston start to drive to work and retail stations do not get resupply from the terminals in a timely fashion.

Schools in Houston are expected to reopen next week, but that timetable may change depending on the recovery progress in the city.


Low-RVP Gasoline Set to Disappear from Another Market

August 16, 2017

It's probably too late for most of this summer's RVP season, but another fairly large slice of downstream real estate will see 7.8-psi RVP gasoline requirements lifted before the next driving season.

A proposed rule for Louisiana was published by the Environmental Protection Agency last week, and it should result in many of that state's southern parishes moving to a summer standard of 9-psi RVP. The rule was published in the Federal Register on Aug. 9, some four months after a request was made by the Louisiana Department of Environmental Quality (LDEQ). Protocol calls for the public comment period to end on Sept. 8, just one week before the end of this summer's RVP season.

There are 11 parishes that would then be held to a more lenient 9-psi standard from June 1 to Sept. 15 each year. They include: Beauregard, Calcasieu, Jefferson, Lafayette, Lafourche, Orleans, Pointe Coupee, St. Bernard, St. Charles, St. James and St. Mary.

EPA has not published rulemaking on a separate proposal by LDEQ that requested a similar relaxation in volatility for five Baton Rouge area parishes. EPA said that it would address that request in a separate rulemaking at a later date. The five parishes are Ascension, East Baton Rouge, Iberville, Livingston and West Baton Rouge.

The 11 parishes near New Orleans met the one-hour ozone tests and were redesignated to ozone attainment status in 2012. Tests also find that those parishes are well below the 2015 ozone limit of 70 parts per billion and EPA notes that the areas have projected decreases for VOC and NOx emissions.

The price of 7.8-psi CBOB this year has fetched a modest premium to 9.0-psi blends, with the lower-RVP Gulf Coast material 4.7-5cts/gal more than 9 psi in June, July and August.  In the more high-priced era of 2011-2014, the summer non-attainment gasoline often fetched a 10-12ct/gal premium versus the 9-psi standard blend.

A number of highly populated areas used to feature 7.8-psi gasoline as a mainstay, but many states eliminated the requirement in recent years. Florida, Alabama and North Carolina, for example, had many metropolitan counties that mandated 7.8-psi fuel earlier this decade, and portions of Tennessee (ex the Memphis area) received relief earlier this year.


U.S. in No Danger of Hitting Tank Top despite Inventory Glut: Barclays

August 10, 2017

Barclays Capital said that it estimates U.S. motor gasoline spare capacity at 46% of total capacity, or 179 million bbl, and distillate spare capacity at 50%, or 128 million bbl.

For total light products, the bank's estimate of adjusted spare capacity is 48%, or 344 million bbl.

Barclays' estimates took into consideration the Energy Information Administration's (EIA) estimate of each product storage capacity and the bank's assessment of U.S. spare storage capacity based on the latest EIA weekly inventory data and latest storage capacity data.

As a result, despite the current inventory glut, light product storage capacity is in no danger of reaching its limit any time soon, the bank said.

The bank noted that the latest weekly DOE inventory data and the storage capacity data are not apples-to-apples, but it came up with its own methodology for the storage capacity calculation.

Based on data from the EIA's semi-annual commercial storage capacity survey, as of March 31, 17, total U.S. net available shell storage capacity for gasoline stood at 460.3 million bbl, up 8 million bbl, or 2%, from the previous Sept. 30,
2016 survey level of 452.2 million bbl. 

Effective working storage capacity stood at 387.3 million bbl, up 8 million bbl, or 2%, from the Sept. 30, 2016 level of 379.7 million bbl.

PADD3 showed the largest increase in effective working capacity (up 3.0 million bbl), followed by PADD1 (up 1.8 million bbl). 

As of March 31, 2017, total U.S. net available shell storage capacity for distillate stood at 292.8 million bbl, down 7 million bbl, or 2%, from the previous Sept. 30, 2016 survey level of 299.8 million bbl. 

Effective working storage capacity stood at 259.1 million bbl, down 6 million bbl, or 2%, from the Sept. 30, 2016 level of 264.7 million bbl.

PADD5 showed the largest decrease in effective working capacity (down 2.7 million bbl), followed by PADD3 (down 1.6 million bbl). 

As of March 31, 2017, total U.S. net available shell storage capacity for jet fuel/kerosene stood at 82.3 million bbl, down slightly from the previous Sept. 30, 206 survey level of 82.6 million bbl.

Effective working storage capacity stood at 72.1 million bbl, down slightly from the Sept. 30, 2016 level of 72.6 million bbl.

PADD3 showed the largest decrease in effective working capacity (down 1.0 million bbl), followed by PADD1 (down 0.1 million bbl).

Based on data from the EIA's semi-annual commercial storage capacity survey, as of March 31, 2017, total U.S. net available shell storage capacity for crude oil stood at 747 million bbl, up 15 million bbl, or 2%, from the previous Sept. 30, 2016 survey level of 732 million bbl.

Effective working storage capacity stood at 621 million bbl, up 17 million bbl, or 3%, from the Sept. 30, 2016 level of 604 million bbl.

PADD3 showed the largest increase in effective working capacity (up 8.7 million bbl), followed by PADD2 (up 5.1 million bbl), while PADD5 showed the only decrease (down 0.9 million bbl).

Cushing effective storage capacity decreased 0.4 million bbl to 76.7 million bbl.

Tank farm effective storage capacity increased 17.3 million bbl to 470.1 million bbl, while refinery gate capacity decreased 0.3 million bbl to 151.2 million bbl.


Global Diesel Supplies Seen Tightening in Q4: Energy Aspects

July 19, 2017

Global diesel supplies may tighten amid robust demand growth in the second half of the year and protracted refinery maintenance programs during the third quarter, Energy Aspects said in its latest Middle Distillate Outlook for July.

Demand growth for the fuel is forecast at 660,000 b/d in the third quarter and 630,000 b/d in Q4 this year, the consultancy said.

Diesel demand strength also comes as refineries in the Atlantic basin have been running at near-record levels, said Energy Aspects. Preliminary European demand for diesel in May indicate a strong rebound in distillate demand, according to the International Energy Agency. ULSD demand was 4.9% higher year on year and heating oil demand rose by 11%. Diesel demand in Germany during May gained by 220,000 b/d year on year, with ULSD accounting for 120,000 b/d of the increase.

"The global refining system's ability to easily meet incremental demand for ULSD has been severely tested," Energy Aspects said in the report. "If autumn turnarounds come in heavier than currently expected, the market will quickly start to look to winter demand and the potential for supplies to be tighter in
Q4 2017 than we might have expected just a few short weeks ago."

European absorption of record-high output is mirrored across the Atlantic in the U.S. PADD3 region, where strong Latin American buying has kept refinery runs above 9 million b/d since late April, preventing any significant overspill of product into Europe, said Energy Aspects. Ongoing refinery outages in Mexico and Venezuela in particular suggest Latin American demand will continue to mop up U.S. Gulf diesel export cargoes.

In addition, a "crunch" in the supply and production of ULSD as India's state- run refiners dealt with the new 50-ppm sulfur limit in diesel has siphoned off cargoes that would have otherwise come to Europe, according to the consultancy.

"Indian buyers have stepped back from the market, but for the Atlantic basin, the damage has been done," said Energy Aspects.

"East of Suez refiners typically supply at least 20% of European ULSD imports, but these volumes will now not come as usual."

While Asian diesel demand growth was flat year on year during the first quarter of 2017, it is expected to have subsequently grown by around 400,000 b/d in Q2, according to the consultancy. A recovery in Chinese demand after six quarters of contraction will then further whet the region's appetite for the fuel, lifting Asian diesel demand growth forecasts to 500,000 b/d in Q3, Energy Aspects said in its Middle Distillates Outlook.


Analysis: GEW Suit Against Colonial PL Raises Questions on Legality, Ethics

July 5, 2017

A key question has emerged from the George E. Warren lawsuit against Colonial Pipeline for profiting from alleged misappropriation of oil products as a result of butane injection.

Colonial Pipeline has been blending butane into gasoline at Baton Rouge, La., in its pipeline system since late 2014, so why is GEW suing Colonial Pipeline for a new similar butane blending operation planned for Powder Springs, Ga.?

The main difference between Baton Rouge and Powder Springs butane blending operations is the difference in business models, which cover buying and selling barrels shipped on Colonial Pipeline for butane blending, some industry sources told OPIS on Monday.

At Baton Rouge, Colonial Pipeline worked with Noble Americas as an intermediary -- trader and blender for the gasoline barrels at that location in Louisiana, sources said. Noble buys and sells batches of gasoline from and to owners of barrels shipped on Colonial Pipeline. In theory, Noble buys the gasoline batches from the owner or shipper, blends butane into the gasoline, and resells the gasoline back to the original owner. Some of the blending profits should be passed on to the original owners when Noble sells the batches back, they said.

At Powder Springs, Colonial and Magellan Midstream Partners plan to inject butane into the Line 1, which delivers 1.37 million b/d of gasoline from Houston to Greensboro, N.C., without any intermediary, sources said. In theory, both companies, with inside knowledge of the fuel specifications on the Colonial Pipeline, plan to inject butane into the gasoline supplies on the pipeline without buying and selling any batches from or to the owners of the barrels, they said.

Some gasoline shippers could be unhappy that Colonial and Magellan would be keeping the butane blending profits at Powder Springs to themselves.

Since OPIS first reported this lawsuit last Thursday, traders and logistics players have been discussing the ethical and legal implications of Colonial Pipeline's butane blending operations.

OPIS notes that this lawsuit could have wide ramifications across the entire U.S. oil products pipeline logistics market as this lucrative butane injection in gasoline has been commonly practiced by many major pipeline operators for the past several years. The lawsuit may also lead to other lawsuits from other shippers.

OPIS reported in 2014 that the startup of Baton Rouge butane injection in gasoline operations on Colonial Pipeline was expected to have an impact on Southeast terminals operators' ability to capture the lucrative blending economics along the 5,500-mile pipeline system. The butane injection startup could potentially affect hundreds of terminals along the Colonial Pipeline. Some of these terminals are owned by TransMontaigne, Magellan and Sunoco Logistics.

Besides the legal and ethical questions, some sources highlighted the significance of Colonial Pipeline's extensive butane blending into gasoline operations compared with other regional systems across the country.

While other systems including Magellan, Enterprise and Buckeye are engaged in similar butane in gasoline blending operations, the impact of Colonial Pipeline's operations outsized the rest by leaps and bounds.

Colonial Pipeline's Line 1 has a capacity of 1.37 million b/d, offering a huge opportunity for heavy butane volume blending and equally significant potential profit margin.

Other regional systems such as TEPPCO and Magellan could have a gasoline delivery capacity of about 20,000-50,000 b/d, which are considered relatively small when compared with Colonial Pipeline, sources said.

Also, the new business plan for Powder Springs may have ruffled some feathers in the gasoline shipping sector because it may be the first time a company is injecting butane directly into a pipeline on a large scale.

Sources said that the common industry practice was to blend or inject butane into gasoline at the terminals before loading onto trucks rather than into the pipeline. A pipeline injection offers large-scale blending opportunity rather than comparatively smaller and less efficient blending operations at terminals.

Last Thursday, OPIS reported that GEW, a major U.S. fuel distributor and blender, sued Colonial Pipeline in the U.S. District Court for the District of New Jersey for profiting from alleged misappropriation of oil products as a result of butane injection, according to court documents obtained by OPIS.

"As a result of Colonial's intentional dilution of the product in its pipeline, the product that GEW will receive at the end of the pipeline will no longer be sufficiently above the minimum required specification to enable GEW to blend it for its own operations and sale, as it does now and has done in the past," GEW said in its lawsuit.

"Thus, by wrongly misappropriating shippers' product for its own use. Colonial will in effect be stealing from GEW (and other shippers) the benefit that GEW (and other shippers) have historically been generating for themselves by blending their above-specification product," GEW said.

GEW said in the lawsuit that by Colonial's own admission, Colonial does not own the products it transports in its pipeline on behalf of GEW and other shippers. Rather, Colonial only provides transportation services. The products that Colonial transports remain the property of the shippers. As a common carrier, Colonial is simply the "bailee" of the products it transports and has no right to use or appropriate the products for its own benefit.

OPIS notes that the lucrative butane injection into gasoline business is not an entirely new business optimization opportunity.

Morgan Stanley had done the same at the TransMontaigne terminal at Collins, Miss., which is connected to Plantation and Colonial Pipelines. Also, Enterprise Products is injecting butane into gasoline in its TEPPCO products pipeline system. Magellan and Buckeye highlighted strong profits from butane injection business segments in their respective 2013 earnings reports.

The opportunity to blend butane is supported by refiners blending gasoline beyond the required RVP specifications as a precaution. This allows blenders to inject butane to blend gasoline to the maximum RVP allowed.

Blenders will take ownership of the extra gasoline volume resulting from the butane injection in the pipelines, and they would be required to buy Renewable Identification Numbers (RINs) for the blended gasoline. The butane injection profits could more than cover the RINs purchase.

To capitalize on butane injection, blenders would find out the exact RVP specifications of the gasoline barrels they pull from the pipelines via analyzing samples.

Blenders take the gasoline barrels offline, inject it with butane and put the maximum allowed RVP gasoline back into the pipelines for delivery to the various destinations.

"If the winter gasoline RVP spec is 13.5, a refiner may blend just up to 13.3 or 13.4 RVP to be sure. A blender could inject cheap butane to push the RVP to the maximum of 13.5," a blender told OPIS in 2014.

"This has become a year-round business. The profits in winter may be less than summer, but it is still very attractive," he said. The limitation for butane injectors is the availability of pipeline capacity to accommodate the extra butane.

Colonial and GEW spokespeople have declined to comment as the lawsuit is ongoing.


George E. Warren Sues Colonial Pipeline on Butane Injection in Gasoline

June 29, 2017

George E. Warren (GEW), a major U.S. fuel distributor and blender, is suing Colonial Pipeline in the U.S. District Court for the District of New Jersey for profiting from alleged misappropriation of oil products as a result of butane injection, according to court documents obtained by OPIS.

"As a result of Colonial's intentional dilution of the product in its pipeline, the product that GEW will receive at the end of the pipeline will no longer be sufficiently above the minimum required specification to enable GEW to blend it for its own operations and sale, as it does now and has done in the past," GEW said in its lawsuit.

"Thus, by wrongly misappropriating shippers' product for its own use. Colonial will in effect be stealing from GEW (and other shippers) the benefit that GEW (and other shippers) have historically been generating for themselves by blending their above-specification product," GEW said.

OPIS notes that this lawsuit could have wide ramifications across the entire U.S. oil products pipeline logistics market as this lucrative butane injection in gasoline has been commonly practiced by many major pipeline operators for the past several years. The lawsuit may also lead to other lawsuits from other shippers.

Colonial Pipeline began its butane injection business a few years ago. OPIS reported in November 2014 that the butane injection business for U.S. gasoline blending finally began on Colonial Pipeline at Baton Rouge, La., after a few years of planning and storage tank construction. Noble Americas emerged as a surprise player in the butane blending operations at Baton Rouge, and the supplier of the blending material was Tulsa-based Murphy Energy.

OPIS reported then that the startup of butane injection in gasoline operations on Colonial Pipeline was expected to have an impact on Southeast terminals operators' ability to capture the lucrative blending economics along the 5,500- mile pipeline system. The butane injection startup could potentially affect hundreds of terminals along the Colonial Pipeline. Some of these terminals are owned by TransMontaigne, Magellan and Sunoco Logistics.

GEW said in the lawsuit that by Colonial's own admission, Colonial does not own the products it transports in its pipeline on behalf of GEW and other shippers. Rather, Colonial only provides transportation services. The products that Colonial transports remain the property of the shippers. As a common carrier, Colonial is simply the "bailee" of the products it transports and has no right to use or appropriate the products for its own benefit.

In the lawsuit, GEW is targeting a new butane injection setup on Colonial Pipeline in Georgia.

Colonial told GEW that it, through a joint venture, is building a blending facility in Georgia to inject butane (a lower-grade product that does not meet the specifications of gasoline) into shippers' gasoline as the gasoline passes through the pipeline (in-line blending). The blending facility, a joint venture with Magellan Midstream Partners called Powder Springs Logistics, will dilute the shippers' gasoline, which thereby degrades it, in order to create additional product for Colonial and/or its partners, which will then be sold for their profit, according to GEW.

"Put differently, without authorization from GEW, Colonial intends to appropriate GEW's gasoline for Colonial's own profit (and/or its partners), in pursuit of a new commercial non-carrier related business venture, to the detriment of GEW, which will receive degraded, less valuable product and none of the excess product created with GEW's product," the lawsuit said.

GEW is thus doubly harmed as GEW receives product that is substantially degraded from what it injected into the pipeline, and GEW is denied the excess product created by Colonial and/or its partners using GEW's product or the profits they earn from selling, directly or indirectly, that excess product, it added.

GEW said that the butane injection operation is a violation of Colonial's obligations under the Carmack Amendment to the Interstate Commerce Act, or in the alternative, is a conversion under common law.

GEW seeks damages as well as an injunction to permanently enjoin Colonial's wrongful conduct, GEW said.

OPIS notes that the lucrative butane injection into gasoline business is not an entirely new business optimization opportunity.

In the past, Morgan Stanley has done the same at the TransMontaigne terminal at Collins, Miss., which is connected to Plantation and Colonial Pipelines. Also, Enterprise Products is injecting butane into gasoline in its TEPPCO products pipeline system. Magellan and Buckeye highlighted strong profits from butane injection business segments in their respective 2013 earnings reports.

The opportunity to blend butane is supported by refiners blending gasoline beyond the required RVP specifications as a precaution. This allows blenders to inject butane to blend gasoline to the maximum RVP allowed.

Blenders will take ownership of the extra gasoline volume resulting from the butane injection in the pipelines, and they would be required to buy Renewable Identification Numbers (RINs) for the blended gasoline. The butane injection profits could more than cover the RINs purchase.

To capitalize on butane injection, blenders would find out the exact RVP specifications of the gasoline barrels they pull from the pipelines via analyzing samples.

Blenders take the gasoline barrels offline, inject it with butane and put the maximum allowed RVP gasoline back into the pipelines for delivery to the various destinations.

"If the winter gasoline RVP spec is 13.5, a refiner may blend just up to 13.3 or 13.4 RVP to be sure. A blender could inject cheap butane to push the RVP to the maximum of 13.5," a blender told OPIS in 2014.

"This has become a year-round business. The profits in winter may be less than summer, but it is still very attractive," he said.

The limitation for butane injectors is the availability of pipeline capacity to accommodate the extra butane.

It is noted that Colonial Pipeline's Line 1, which delivers gasoline from Houston to the Mid-Atlantic, is not allocated for the first time since 2011, reflecting the oversupply situation in the Southeast and high refinery utilization in the Northeast.

Both Colonial and GEW spokespeople declined to comment as the lawsuit remains ongoing.


Colonial Pipeline's Non-Allocation Signals Changing Refining, Market Dynamics


June 22, 2017

The first non-allocation for Colonial Pipeline's Line 1 reflects the signs of the times amid a changing landscape for refiners and marketers in the east of the Rockies.

Colonial Pipeline said early on Thursday that its nominations have fallen below its capacity. As such, Colonial will not be calling allocation on Cycle 37, Line 1. Nominations will be monitored closely to ensure the nominations do not rise above our capacity prior to shipping. Line 1 ships gasoline from Houston to the Mid-Atlantic.

Industry sources said that Colonial Pipeline, which could deliver a maximum of more 1 million b/d of gasoline from the Gulf Coast to the Mid-Atlantic and Northeast, has seen consistent nomination allocation on its pipelines for both gasoline and diesel, possibly as far back as 2011.

A Colonial Pipeline spokeswoman said that Line 1 capacity has been allocated without pause since mid-year 2011 (Cycle 42 in 2011).

Sources said that Line 2, a distillates pipeline running parallel with Line 1, remains fully allocated. However, as with Line 1, Line 2 sees ups and downs in shipping volumes due to seasonal demand.

The writing was already on the wall for the diminished demand to ship Gulf Coast products to the North.

The Gulf Coast market saw an extended decline in gasoline line space values on the Colonial Pipeline, with line space value ranging from a penny discount to a few pennies. This negative value for line space reflects the closed arbitrage window for delivering products up north. This also means that some shippers were willing to pay a few pennies per gallon for someone else to ship products due to their ship-or-pay contracts.

OPIS notes that the east of the Rockies products and refining market is continuing to evolve.

The Northeast refiners are now enjoying healthy refining margins, thanks to relatively low crude prices and price-advantaged crude imports. Also, the Southeast rack products price netbacks to the Gulf Coast values are challenged. The Southeast market is taking advantage of a soft Jones Act tanker market, with more waterborne deliveries from the Gulf Coast seen in the past year.

"Even the new shippers do not want to ship products," a trader said.

Colonial Pipeline has enjoyed maximum allocations for consecutive years, and this created an aftermarket for line space for products shipping. Line space could be sold at a premium, especially during a supply issue in the Mid- Atlantic and Northeast.

The line space transactions allow longtime shippers to not only cut their losses during a close arbitrage window, they also allow these shippers to hold on to their allocations so that they could capitalize on a seasonal peak demand period.

It was not uncommon for gasoline shippers to eat some losses in the winter, but they would see guaranteed profits from shipping summer gasoline.

However, it has not been that way for an extended period of time since last year after crude prices hit the bottom.

In the Northeast, refiners are now facing stiff competition from the Midwest, which is competing aggressively for the western Pennsylvania products market share. As Midwest pushes more products to Pittsburgh, more products are backed out to the Northeast and Mid-Atlantic.

This chain reaction in the Northeast is now having a knock-on effect on supplies delivered to the Northeast from the Gulf Coast. However, it is noted that this impact on the Gulf Coast may be limited due to a robust export flow to the Caribbean and South America.


Colonial Pipeline's Non-Allocation Signals Changing Refining, Market Dynamics


June 22, 2017

The first non-allocation for Colonial Pipeline's Line 1 reflects the signs of the times amid a changing landscape for refiners and marketers in the east of the Rockies.

Colonial Pipeline said early on Thursday that its nominations have fallen below its capacity. As such, Colonial will not be calling allocation on Cycle 37, Line 1. Nominations will be monitored closely to ensure the nominations do not rise above our capacity prior to shipping. Line 1 ships gasoline from Houston to the Mid-Atlantic.

Industry sources said that Colonial Pipeline, which could deliver a maximum of more 1 million b/d of gasoline from the Gulf Coast to the Mid-Atlantic and Northeast, has seen consistent nomination allocation on its pipelines for both gasoline and diesel, possibly as far back as 2011.

A Colonial Pipeline spokeswoman said that Line 1 capacity has been allocated without pause since mid-year 2011 (Cycle 42 in 2011).

Sources said that Line 2, a distillates pipeline running parallel with Line 1, remains fully allocated. However, as with Line 1, Line 2 sees ups and downs in shipping volumes due to seasonal demand.

The writing was already on the wall for the diminished demand to ship Gulf Coast products to the North.

The Gulf Coast market saw an extended decline in gasoline line space values on the Colonial Pipeline, with line space value ranging from a penny discount to a few pennies. This negative value for line space reflects the closed arbitrage window for delivering products up north. This also means that some shippers were willing to pay a few pennies per gallon for someone else to ship products due to their ship-or-pay contracts.

OPIS notes that the east of the Rockies products and refining market is continuing to evolve.

The Northeast refiners are now enjoying healthy refining margins, thanks to relatively low crude prices and price-advantaged crude imports. Also, the Southeast rack products price netbacks to the Gulf Coast values are challenged. The Southeast market is taking advantage of a soft Jones Act tanker market, with more waterborne deliveries from the Gulf Coast seen in the past year.

"Even the new shippers do not want to ship products," a trader said.

Colonial Pipeline has enjoyed maximum allocations for consecutive years, and this created an aftermarket for line space for products shipping. Line space could be sold at a premium, especially during a supply issue in the Mid- Atlantic and Northeast.

The line space transactions allow longtime shippers to not only cut their losses during a close arbitrage window, they also allow these shippers to hold on to their allocations so that they could capitalize on a seasonal peak demand period.

It was not uncommon for gasoline shippers to eat some losses in the winter, but they would see guaranteed profits from shipping summer gasoline.

However, it has not been that way for an extended period of time since last year after crude prices hit the bottom.

In the Northeast, refiners are now facing stiff competition from the Midwest, which is competing aggressively for the western Pennsylvania products market share. As Midwest pushes more products to Pittsburgh, more products are backed out to the Northeast and Mid-Atlantic.

This chain reaction in the Northeast is now having a knock-on effect on supplies delivered to the Northeast from the Gulf Coast. However, it is noted that this impact on the Gulf Coast may be limited due to a robust export flow to the Caribbean and South America.


Fuel Retailers in Las Vegas See Wild Rack-to-Retail Diesel Margin Moves


June 14, 2017

Fuel retailers in Las Vegas have been seeing wild rack-to-retail diesel margin moves in the past few months due to a combination of volatile rack prices and relatively flat retail values, industry sources told OPIS on Wednesday.

The Las Vegas rack prices are influenced by Salt Lake City and Southern California values, reflecting the supply sources.

Despite the wild rack price moves, retailers are still enjoying relatively healthy margins.

This week, the lowest Las Vegas unbranded rack diesel price was pegged at about $1.65/gal, compared with $1.76/gal in early June, $1.57/gal in mid-May and $1.75 /gal in mid-April.

Some players noted that the rack price range was significantly wider in the past few months than the retail price moves.

The street retail diesel prices in Vegas have been mostly range-bound at around 10-15cts/gal, hovering around the $2.50/gal mark in the past few months, sources said. Even with the latest rise in rack prices, some retailers are still enjoying a retail fuel margin of more than 30cts/gal, they said.

It is unclear why Vegas street retail prices have not been moving more closely in line with the rack prices as seen in other U.S. racks market. It is common for retailers and rack suppliers to adjust price increases quickly, but price drops could be more gradual.

Sources said that this retail margin phenomenon is seen only in the Las Vegas diesel market, and not gasoline.

Meanwhile, Southwest rack diesel prices have seen huge ups and downs in the past few months.

The refinery production cut back in Utah due to a shutdown of crude pipeline, which propped up prices in April, but prices fell significantly in May due to stronger unbranded market competition or possibly inventory management.

Rack prices have climbed again recently due to an ongoing turnaround at Phillips 66's 63,400-b/d Billings, Mont., refinery. The maintenance work is expected to last about two months, in May and June.

Sources said that diesel barrels are being drawn to the north of Vegas and Salt Lake City into Idaho and Wyoming.

Salt Lake City diesel unbranded low rack prices were at $2.06/gal, compared with $1.55/gal in mid-May and $1.91/gal in mid-April.

 

venue

Renaissance Nashville Hotel 611 Commerce Street
Nashville, TN, 37203
Main Phone: 615-255-8400

OPIS

Oil Price Information Service (OPIS) believes there should be complete price transparency across the oil supply chain so that all stakeholders can buy and sell petroleum products confidently. We provide that transparency through educational courses, software tools, real-time news and pricing services, and market-specific benchmark pricing reports. Being a reliable information source with world-class customer service is important to us, as it helps fulfill our mission to enable customers to make smarter, more informed decisions. Navigating oil price volatility is tough – OPIS strives to make it a little easier. OPIS is an IHS Markit company. Learn more at www.opisnet.com