RVP waiver fails to move US Gulf gasoline markets

US Gulf coast spot fuel markets largely shrugged at a early waiver for higher RVP gasoline sales in Louisiana and Mississippi due to its limited scope and duration, as well as logistical hurdles to move fuel in and out of the hurricane-hit states.

The US Environmental Protection Agency (EPA) yesterday issued a waiver under the Clean Air Act that will allow the production, sales and distribution of 11.5 RVP gasoline effective immediately — more than two weeks ahead of the original transition on 15 September.

The waiver, aimed at minimizing supply disruptions, would in theory allow splash blending of more butane and naphtha into the finished 9 RVP gasoline pool, which would subsequently see pricing for 11.5 RVP and 9 RVP gasoline converge.

But it triggered little interest from participants in the gasoline and blendstock markets today, as the spread between 11.5 RVP and 9 RVP grades actualy widened. Gasoline grades of 11.5 RVP were valued at a 2¢/USG discount to 9 RVP grades today, compared with 1.5¢/USG yesterday. CBOB with 11.5 RVP shed 0.75¢/USG against a lower Nymex RBOB futures contract.

All Louisiana ports — Baton Rouge, New Orleans, Plaquemines, South Louisiana and St Bernard — remain closed today. While operations have resumed on the Colonial pipeline that carries refined products from the Gulf to the US Northeast, Kinder Morgan's 700,000 b/d Products (SE) Pipe Line system — formerly known as Plantation — from Mississippi to North Carolina was shut in because of power outages.

"Nothing can move in Louisiana and Mississippi," a market source said.

This means that not only is local road travel reduced in the short term, it is also extremely difficult to get finished fuel or blending components in and out of these states.

Although participants in the butane and naphtha markets are aware of the waiver, there has not been any additional interest in these typical winter blendstocks today from gasoline producers.

Meanwhile, regions supplied by refineries in Louisiana, including southeastern states and Florida, are outside of the scope of the RVP waiver. In terms of their role in the market, Louisiana and Mississippi are much bigger suppliers than they are consumers.

Moreover, the market is only two weeks away from the original mid-September transition. Many producers have already tilted refining and blending operations to higher RVP fuels. The spot market transitions from 9 RVP to 11.5 RVP beginning at the end of this week, on 3 September.

By Chunzi Xu