Los Angeles price surge opens rare USGC/Canada arb

OREANDA-NEWS. July 24, 2015. Record high gasoline prices in Los Angeles, California, opened up an unusual arbitrage channel from the US Gulf Coast to Vancouver, Canada.

Heavier-than-expected summer refinery maintenance and strong exports to Mexico sent Los Angeles gasoline cash differentials swinging more than a dollar above the Nymex mark for five consecutive sessions starting 9 July. Cash differentials peaked at 120?/USG over the Nymex screen on 14 July, their highest point since October 2012, while the average outright price hit a one-year high at \\$3.2201/USG on 9 July.

The price surge subsequently drained supplies from the Pacific Northwest, a region that in turn supplies the Vancouver market when short. Washington state is normally net long on gasoline and feeds the San Francisco and Los Angeles networks when arbitrage economics are viable. Refinery issues in Alberta, Canada, have tightened availability there.

The US Gulf Coast is by contrast oversupplied, as strong cracks encourage high production.

A trading company booked two gasoline cargoes totaling 533,000 bl out of the US Gulf Coast in the past two weeks, slated for delivery to Vancouver in early August. The Yayoi Express left Port Arthur, Texas, on 21 July for Vancouver, while the Haruna Express left the US Gulf Coast around 10 July.

The last shipments of gasoline from the US Gulf Coast to the US West Coast occurred in June 2013, totaling 53,000 barrels, according to US Energy Information Administration (EIA) data. Because the US Jones Act of 1920 limits US port-to-port shipments to US-flagged vessels, the Los Angeles products market generally relies on foreign imports or other forms of intraregional relief in times of short supply.