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US Gulf fuel prices rise as storm approaches

20 Jun 2017 18:05 (+01:00 GMT)
US Gulf fuel prices rise as storm approaches

Houston, 20 June (Argus) — Gasoline prices in the US Gulf coast region trended higher for a fourth consecutive session today as a potential tropical cyclone in the Gulf of Mexico developed.

The yet unnamed disturbance in the Gulf of Mexico is expected to make landfall in the US Gulf coast later this week, dropping heavy rains over Texas, Louisiana, Alabama, Mississippi, and the Florida panhandle. This could both disrupt production and cut demand.

Regional differentials in the US Gulf for 9.0 RVP 87 conventional (M2) grade gasoline have climbed steadily since late last week, rising by nearly 4¢/USG over the last four sessions.

Trades for prompt M2 in the region were done as high as July RBOB Nymex -2¢/USG today — the highest level differentials have reached since 23 February.

Additionally, part of the rally in M2 values was attributed to increased demand from Mexico following a fire early last week at Pemex's 330,000 b/d Salina Cruz refinery on Mexico's southern Pacific coast.

Prices in the Gulf reacted similarly last August as Hurricane Hermine made its way through the Gulf of Mexico, elevating concerns of a disruption in production and supply. At the time, M2 differentials rose from -0.125¢/USG to +14¢/USG over a five day period.

The price of 62 grade ultra-low sulphur diesel (ULSD) so far seems unaffected by the approaching storm. Regional differentials for prompt ULSD were up by just under 1¢/USG over the last four trading sessions, with values holding steady with the previous session at July Nymex ULSD -3.45¢/USG.