US Gulf coast natural gasoline in backwardation

OREANDA-NEWS. July 20, 2015. Natural gasoline's price structure shifted into backwardation this week as July demand outpaced price expectations for August.

After running a 1?/USG to 1.5?/USG contango for weeks, the Mont Belvieu, Texas, natural gasoline July/August spread narrowed to 0.125? on 13 July, dropped to parity on 14 July, before falling to a 2.375? backwardation midweek, according to Argus forward curves.

The flip comes amid an uptick in July naphtha exports and stronger Canadian condensate demand for August delivery.

The 42,000t products tanker Tonna was heard loading naphtha for a refiner at the New York Harbor earlier this week, while the 43,000t BW Seine is expected to load naphtha later this month before sailing to Venezuela. Another smaller vessel will load natural gasoline at the end of July for export to Colombia, but details of the fixture have yet to emerge.

In Canada, Edmonton condensate was sold at a \\$0.50/bl discount to August calendar month average (CMA) Nymex WTI yesterday, up from a discount of \\$1.25-\\$0.50/bl. This coincided with a jump in LST natural gasoline's price to a 3.25-3.5?/USG premium to EPC natural gasoline as the Gulf coast-to-Canada diluent arbitrage improved.

The transportation time for product running from the LST terminal to Edmonton, Alberta, is roughly 17-28 days depending on the volume.

New production at Imperial Oil's Kearl site is drawing incremental diluent barrels, sources have told Argus. Canadian diluent demand is not expected to firm substantially until the winter.

LST natural gasoline's premium to EPC sunk back to 2.5?/USG today. EPC natural gasoline firmed to 108.75?/USG and Edmonton condensate was heard stronger, at parity to August CMA Nymex WTI.

Natural gasoline's July/August backwardation was heard at 0.375? at the end of the week.