US Gulf coast (USGC) gasoline prices rose by more than 5pc during Monday's morning trading after US and Israeli strikes on Iran over the weekend led to higher Nymex April RBOB prices.
Prices for Colonial Pipeline regular 11.5 RVP CBOB for cycle 15 scheduling have so far seen a 6.95¢/USG increase in cash values from the 27 February assessment to $2.101/USG during Monday's morning session, which puts CBOB prices at their highest point since 20 June, when the settlement was $2.140/USG.
A 7.83¢/USG increase in the Nymex basis overwhelmed a comparatively small differentials loss of 0.88¢/USG as market participants reported CBOB trades ranging from April Nymex -25.25¢/USG down to -27.25¢/USG, as of 12pm ET.
Though the strikes on Iran and the ensuing conflict has led to a 6.2pc hike for US crude benchmark WTI, the gains in regional gasoline prices are expected to be tempered by an oversupplied gasoline market combined with declining export opportunities.
US Gulf coast gasoline inventories have posted a 6.5pc gain on the year for the current January-February period at 92.58mn bl, marking the highest average for that two-month period since 2020, US Energy Information Administration data show.
But Gulf coast gasoline prices typically climb this time of year with the spring Reid Vapor Pressure (RVP) transition period as refiners turn over their tanks to meet more stringent regional environmental regulations. The Gulf coast gasoline market moved to more expensive spring 11.5 RVP specifications on 26 February, raising CBOB prices by 16.67¢/USG from the earlier session. The transition has so far led to a decline in exports, which fell to three-week lows of 216,000 b/d in the week ended 27 February, according to trade analytics firm Kpler.
However, the fighting in the Middle East will likely divert available tankers in the Gulf of Mexico and lift freight rates, limiting regional gasoline exports. In addition, refiners will favor exporting Gulf coast diesel barrels as distillates arbitrage between Europe and the US Atlantic coast opens following a rally in the European middle distillates market.
