US gasoline cracks fall to negative territory: Update

Adds RBOB settle, detail on direction of trade in final paragraph.

Benchmark gasoline prices fell below regional crude settlements yesterday in major US fuel markets, a rare spring inversion responding to the demand destruction of a global effort to contain the spread of the new coronavirus.

Regional sweet benchmark crudes settled higher than corresponding gasoline benchmarks in the US Atlantic, Gulf and west coasts and the midcontinent, based on Argus assessments. Gasoline in each case was worth less than a barrel of certain sweet crudes purchased to produce it. The fuel retained a premium to sour crude benchmarks in the US Gulf coast, midcontinent and in the Los Angeles, California, market. Overall refining crack spreads — a measure of refinery profitability — were sharply lower but kept positive on the strength of diesel margins.

Cities have ordered residents to shelter in place, states have closed restaurants and bars, and the federal government yesterday urged anyone able to work from home for the next two weeks to do so to limit the spread of the coronavirus. Deep cuts to gasoline consumption were inevitable, though not yet quantified by the Energy Information Administration.

The gasoline discounts to crude happen occasionally, including last February in the New York Harbor, US Gulf coast and midcontinent markets. The reversal more often occurs in January or February, when US gasoline demand shrinks. But they last happened at the same time across these four regions in December 2014.

A barrel of Buckeye RBOB in the New York Harbor fell to a $3.23/bl discount to Brent. Colonial M grade conventional gasoline fell to a 56¢/bl discount to WTI Houston and a 36¢/bl discount to Light Louisiana Sweet (LLS). San Francisco CARBOB dropped to a 18¢/bl discount to Alaskan North Slope (ANS). No market began March below a $5/bl premium to their respective regional crude.

Diesel premiums to crude settled yesterday above the five-year weekly average in the Atlantic and west coasts. But refinery margins yesterday settled at least 50pc lower than that same five year average period in every region.

The Nymex April RBOB contract settled today at 71.14¢/USG, higher by 2.15¢/USG than the previous settle. Regional differentials to that benchmark were falling in the US Gulf coast, Chicago and San Francisco markets. New York Harbor Buckeye RBOB was slightly higher from yesterday's midpoint in afternoon trade.

By Elliott Blackburn