As California Gas, Diesel Hike Higher, Traders 'Cautiously Optimistic'

May 7, 2020

California gas and diesel spot market cash differentials firmed with brisk trade on Thursday with market participants citing several factors they consider to be the cause for cautious optimism.

Weekly fuel demand for the West (including the Rockies) remains significantly lower year-on-year, according to OPIS DemandPro data, however modest week-on-week increases have been logged the last two weeks. OPIS DemandPro data indicate a 7.9% increase in demand for the week of April 18 and a 5.9% demand increase the week of April 25.

Gasoline inventories for the West Coast (PADD5) region posted one of the largest national draws of 1.6 million bbl for the week ended May 1, according to U.S. Energy Information Administration.

"You had a draw of 1.6 million this week and a similar volume the week prior," a West Coast trader said. "Run rates are still cut. People are probably anticipating a surge once (California's stay-at-home order) is lifted."

Additionally, West Coast refiners have managed to significantly reduce run rates. Refiner utilization rates for the week ended May 1 were under 60%, the lowest of all five regions nationally aside from the Northeast, according to the U.S. Energy Information Administration.

Demand may be higher and refiner run rates are at historic lows for the West Coast, however both CARB reformulated gasoline inventories and CARB diesel inventories remain well-above year-ago marks, according to the California Energy Commission's Weekly Fuels Watch Report.

CARB RFG inventories decreased 10.8% for the week ended May 1 from the week prior, but remain 14.1% above year-ago levels, according to the CEC.

CARB diesel inventories also posted a week-on-week draw, yet diesel inventories are nearly 8% higher than this time last year.

"I would describe the outlook as cautiously optimistic" said one veteran West Coast trader.

May-delivered Los Angeles CARBOB differentials strengthened 2.25cts/gal after transacting at NYMEX June RBOB futures plus 4cts/gal. Implied prices rallied 7.70cts/gal with a combination of Merc buying and firmer basis levels pushing implied prices within spitting distance of $1/gal.

"(It's a) combo of demand increasing, still down (year-on-year) but increasing (week-on-week) and run cuts," a second West Coast trader said, adding "longer transit times too on the pipe."

West Coast traders had previously told OPIS that Kinder Morgan, operator of key regional product transport pipelines, reduced flow rates to accommodate decreased demand caused by stay-at-home measures geared towards combating the coronavirus disease 2019 (COVID-19) pandemic.

"We continue to make the adjustments necessary to ensure continued pipeline operations. We are working closely with our customers on this matter," Kinder Morgan previously told OPIS.

Diesel values also strengthened this week, with a third West Coast trader saying diesel demand has picked up.

Los Angeles CARB diesel discounts narrowed to NYMEX June ULSD futures minus 5cts/gal after trading at that level on Thursday afternoon. That's half of what the discounts were this time last week, according to OPIS data.

San Francisco CARB diesel traded at minus 3cts/gal on Thursday, compared to an assessed mean of minus 14.50cts/gal a week ago.

The OPIS Bottom Line Report continues to show double-digit discounts at the wholesale level to the posted OPIS low in some California cities. Sacramento CARB diesel discounts of 32cts/gal at the wholesale level were reported, good for a wholesale price of about $0.83/gal. San Francisco wholesale CARB diesel discounts of nearly 30cts/gal were reported.

In addition to working through plentiful refined products inventories, more than a dozen crude oil laden tankers remain outside the Ports of Los Angeles and Long Beach, OPIS previously reported. Data from IHS Markit's  Market Intelligence Network (MINT) ship tracking database indicate at least a dozen remain in the area waiting to unload.

IHS Markit is the parent company of OPIS.

--Reporting by Bayan Raji, braji@opisnet.com;

--editing by Kylee West, kwest@opisnet.com

Copyright, Oil Price Information Service



Marathon Petroleum to Temporarily Idle Martinez Refinery

April 17, 2020

Marathon Petroleum said it will temporarily idle its 166,000-b/d Martinez, Calif., refinery later this month due to weak demand caused by the coronavirus disease 2019 pandemic (COVID-19).

"COVID-19 and the public health response to it have negatively impacted the global economy and demand for our products," according to a statement from the company on Friday. "Accordingly, MPC will temporarily idle our Martinez, California, refinery as of April 27. We plan to utilize our integrated network of assets to continue meeting customer commitments and do not anticipate supply disruptions in the region."

Marathon said in the statement it would maintain regular employee staffing levels during the idle period, with employees assigned to tasks that are necessary to support its idle status and eventual return to normal operations.

"At this time, the duration of the idle period is unknown; however, it is our intent to return to normal operations once demand levels support doing so," according to the statement.

Refiner utilization rates for the West Coast (PADD5) region were at all-time lows of 65.1% for the week ended April 10, according to the U.S. Energy Information Administration.

 

--Reporting by Bayan Raji, braji@opisnet.com;

--Editing by Kylee West, kwest@opisnet.com

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California Gas at the Pump Drops Below $3/gal

April 8, 2020

As regional gasoline inventories continue to grow amid a drop-off in demand, the statewide average for gas at the pump in California slipped below $3/gal this week for the first time in two and a half years.

For the few drivers who are out on the roads in the state with a stay-at-home order in place, prices at the pump average $2.935/gal, according to AAA. The last time Californians saw the average this low was following Hurricane Harvey in August 2017.

Still, Californians are paying about a $1/gal more than the national average.

Market sources have reported demand off by as much as 60% for some West Coast retailers. Year-on-year, OPIS DemandPro data indicate demand was off 50% for the week ended March 28 for the West, which includes the Rockies.

At the wholesale level, the OPIS Bottom Line Report shows discounts of 25cts/gal to the OPIS Low in the Los Angeles area, with deals confirmed at 65cts/gal. In San Francisco, discounts of 3cts/gal to the OPIS Low were confirmed, good for a price for 60.75cts/gal.

Major price declines at the spot market level have ignited the lower prices for consumers. Los Angeles CARBOB spot market prices are more than $1.50/gal below month-ago marks. San Francisco CARBOB prices have lost about $1.30/gal over the last five weeks.

West Coast refiners have reduced utilization rates in an effort to adjust for demand destruction caused by the coronavirus disease 2019 (COVID-19), but gasoline inventory levels continue to grow and currently sit at two-year highs for the West Coast (PADD5) region.

PADD5 refiner utilization rates were 69.2% for the week ended April 3, down from 76.8% the week prior, according to freshly released Energy Information Administration data.

The OPIS Refinery Maintenance Report (RMR) previously reported Chevron idled the larger of two crude units at its 290,500-b/d El Segundo, Calif., refinery.

PBF Energy's 158,000-b/d Martinez, Calif., refinery has temporarily idled its FCC, OPIS RMR reported. Similarly, the 147,000-b/d Phillips 66 refinery in Los Angeles and Valero's 87,000-b/d Wilmington refinery, also in Southern California, have also reportedly reduced rates.

 

--Reporting by Bayan Raji, braji@opisnet.com; and Beth Heinsohn, bheinsohn@opsinet.com;

--Editing by Kylee West, kwest@opisnet.com

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Despite Supply Draw, L.A. Jet Fuel Prices Sink to Longtime Lows

March 19, 2020

Los Angeles jet fuel spot market cash differentials cratered nearly 10cts/gal on Thursday with continued selling interest as regional storage fills up from dramatic air travel reductions amid concerns of the coronavirus disease 2019 (COVID-19) pandemic.

L.A. March-delivered jet fuel was confirmed traded at NYMEX April ULSD futures minus 30cts/gal, 9.50cts/gal below where mean differentials were assessed on Wednesday. Meanwhile, implied prices were seeing losses of about 6cts/gal as futures buying partially offset weaker spot market values. Still, at $0.69/gal, L.A. jet prices are at lows not seen since the summer of 2002, according to OPIS data.

"This market is getting full really fast," one West Coast trader told OPIS on Wednesday.

OPIS previously reported California's jet inventories notched a surprise drawdown of nearly 10% last week, the latest California Energy Commission's Weekly Fuels Watch shows.

During the week of March 13, California jet stocks fell 9.5%, to 2.772 million bbl. Year on year, they are now about 17% lower at 3.321 million bbl at the same time last year.

Refinery production of jet fuel was off by 1.5%, to 1.763 million bbl. That level was nearly a quarter less than the 2.312 million bbl seen at the same time in 2019.

Still, jet imports are steady with about a half-dozen cargos expected to reach the West Coast through the end of March, according to independent ship broker data.

 

--Reporting by Bayan Raji, braji@opisnet.com and Frank Tang, ftang@opisnet.com;

--Editing by Kylee West, kwest@opisnet.com

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