Various means are used to measure what constitutes the U.S. "driving season," but suffice it to say that all measuring metrics put the country well past the halfway point. That's why this morning's OPIS Bottom Line Report is particularly disturbing to U.S. refiners. Even with refinery runs just over three-quarters of normal, processors are cutting deals to get volumes out of terminals before containment problems develop.

OPIS counted some 80 terminals this morning where the sharpest buyers were able to procure conventional, reformulated or CARBOB grades of gasoline at 4cts to 9.5cts/gal off OPIS Low. Of those 80 locations, 18 of the terminals saw double-digit discounts, in some cases exceeding 30cts/gal.

As has been the pattern in 2020, Rocky Mountains, Southwestern and Great Lake states represented the most difficult geography to "clear" motor fuel. Arizona saw discounts of 7cts/gal in Phoenix, but unbranded and branded gas could be had for 16.5-20.6cts/gal under OPIS Low. Colorado, however, retained its status as the most challenging state for wholesale gasoline movement. Discounts ranged from 10.75cts/gal in Fountain, 31.47cts/gal in Denver and 43.74cts/gal in Colorado Springs. Montana refiners had to contend with widespread double-digit discounts, and the $1.135/gal E10 value in Great Falls (40cts/gal below OPIS Low) represented the cheapest motor fuel price in the country.

Illinois and Ohio could also be characterized as "markdown states." In Illinois, almost every rack terminal saw discounts of 4cts/gal off OPIS Low, and there were instances where diesel was slashed down below $1.18/gal thanks to aggressive discounts. Ohio was similarly distressed with five locations finding discounts of 10-21.5cts/gal. Indiana saw a price cut of more than 10cts/gal below OPIS Low in Huntington with most other locations discounted by 5-8cts/gal. Price cuts of more than 4cts/gal were witnessed in the Twin Cities region, indicating plenty of local supply.

Even markets fed by Gulf Coast refineries saw widespread discounts that could widen as one of the country's largest refineries - the Galveston Bay complex operated by Marathon Petroleum -- is restarted over the coming days. Places like Arcadia, La., saw discounts of 5cts/gal from OPIS Low and Texas was a veritable potpourri of markdowns, with some locations near the Mexican border seeing discounts of more than 34cts/gal.

Coastline terminals generally did not see discounts as aggressive as in the interior of the country, but Washington state was an exception to that rule.

Seattle and Tacoma gasoline were available at 9.1cts/gal and 5.35cts/gal off OPIS Low.

In short, gasoline prices have recovered from their impaired spring lows, but many refiners are not able to price downstream fuel at numbers that match up with spot prices. Investment analysts relying on spot assessments may be guilty this summer of underestimating just how challenging it is to move wholesale gasoline, even in the middle of driving season.

 

--Reporting by Tom Kloza, tkloza@opisnet.com;

--Editing by Barbara Chuck, bchuck@opisnet.com

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