Gasoline prices in the US Gulf coast market took double-digit drops this week as products struggle to find an outlet.
The conventional 87 octane gasoline market on the Gulf coast fell 17.67¢/USG over the last seven calendar days. Rapidly falling crude prices have also dragged the Nymex Rbob contract lower, pushing the outright price to $1.46/USG on 11 Dec from their last peak at $2.11/USG 7 November.
Production in the USGC remains strong with refinery utilization at 97.4pc, according to the Energy Information Administration (EIA), but the output is pouring into an over supplied market with unpopular shipping options.
Strong exports, which helped the market ahead of the holiday season, now appear to be suffering from a lull in activity despite healthy demand.
Ongoing allocations along the Colonial Pipeline system, which traditionally moves gasoline from the Gulf coast production hub to the high-demand US northeast, have hampered the ability of shippers to transport barrels. Prices for space on the Colonial Pipeline have fluctuated between historical highs of 22.75¢/USG and recent ‘lows' of 12.5¢/USG. The strong prices are supported by high costs associated with shipping barrels to US destinations on the requisite Jones Act vessels.
The US midcontinent, traditionally the secondary destination for refined products from the US Gulf coast, has seen refinery utilization surge to nearly 99pc. As a result prices in Chicago and Group Three gasoline have fallen in excess of 30¢/USG since the end of November, making the region an even less likely destination for Gulf coast barrels.
With few options, Gulf coast gasoline supplies have continued to outpace demand. PADD 3 spot market supplies of RBOB shrank by 153,000bl compared with the prior week, but stocks remain more than 9pc above levels from this time last year. Similarly CBOB stocks, which grew by 220,000bl over the past week, are more than 2.5pc above last year.
Adding to the downward pressure, gasoline demand is relatively poor throughout the country. According to the EIA, ‘product supplied,' a proxy for market demand, fell by 9.3pc over the past week. The decline totaled more than 875,000 bl.
am/tdf
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