US refined product prices surge post storm

Refined products prices in the US extended gains this week, particularly in the Gulf coast and Group Three markets, where refiners are ramping up production in the aftermath of last week's severe winter storm.

Gulf coast refineries have begun to restart this week, after crude throughout fell to 6mn b/d last week, the lowest level since 2008, data from the US Energy Information Administration (EIA) show. Power and natural gas curtailment to Texas refineries earlier in the week slowed the restart process, and refiners are not expecting to fully return to pre-storm rates until early March.

The restarts did not stop Gulf coast conventional gasoline from rising to $1.86/USG yesterday, the highest level since July 2019. Colonial pipeline ultra-low sulphur diesel (ULSD) also rose to $1.88/USG on 24 February, the highest level since January 2020.

Gasoline gains this week mostly came from Nymex futures, while physical markets saw some relative weakness. Conventional gasoline was valued at 11.5¢/USG below Nymex futures yesterday, marking the deepest discount since June last year.

The Gulf coast gasoline spot market will transition to 11.5 RVP on 1 March, down from the current 13.5 RVP. This transition to lower RVP typically involves a premium.

Outside the Gulf coast, the winter storm also caused significant supply disruptions in Oklahoma and Kansas, which lifted diesel and gasoline prices on the Magellan pipeline in the Group Three spot market.

Far from the coast, resupply sources for the Group Three market is largely limited to the similarly bullish Gulf coast market. An open arbitrage has drawn spot diesel supply from the Gulf coast over the past week, and widening gasoline spreads could draw more, sources say.

Elsewhere in the US, spot prices have risen on the back of Nymex futures, even though prompt supply is trending higher in areas like New York Harbor. New York Harbor gasoline inventories have risen to the highest level since July, at 37.7mn bl last week, EIA data show. More Gulf coast supplies began reaching the New York Harbor market on the Colonial pipeline as well, along with increased booking from Europe over the past week.

In Los Angeles, sub-octane gasoline transitioned to 5.99 RVP at the end of last week, which helped bring the grade to over $2/USG this week, the highest level since November 2019.

By Chunzi Xu