Chicago gasoline surges on BP Whiting outage

OREANDA-NEWS. August 13, 2015. Regional gasoline prices have surged higher in the US midcontinent as an outage at the largest crude distillation unit (CDU) at BP's 410,000 b/d refinery in Whiting, Indiana, brought supply concerns to the fore.

News of the CDU outage boosted buying interest in Group Three as well as Chicago, although gains were concentrated in the latter. The 8 August shutdown has also had an outsized effect on gasoline values.

BP won't say when it expects to have the CDU back up, although concerns about the possibility of a lengthy shut-down continues to increase supply concerns. Initially it appeared the CDU would be shut down for just a week but some market sources believe it may be as long as two months. BP would not say how much the repairs have lowered output but says it continues to meet its fuel supply obligations.

Chicago gasoline values have risen between 60?/USG and 65/USG since 7 August compared with 8.4?/USG gains for ULSD. In Group Three prices have risen by 29?-31?/USG for gasoline and just 7.9/USG for ULSD.

Regional differentials have gapped in both markets. Fixed prices soared higher in Chicago yesterday gaining 40/USG to 50?/USG in a single session and accelerating the rally which began Monday. The strong gains have pushed the gasoline markets into severe backwardation and eliminated the contango structure from the distillates markets.

The higher prices have affected the US Gulf coast market where trades for product loading into the Explorer pipeline destined for the Chicago market commanded premiums of 4.25/USG over product loading into the New York Harbor-bound Colonial pipeline. Similar trades typically receive a slight premium of 0.5/USG to 1.5/USG.

The Whiting issues have also led to Western Canadian Select (WCS) crude trading at the deepest discount to the US WTI benchmark in more than a year. Whiting is the the largest single US processor of Canadian crude. September WCS at Hardisty, Alberta, traded today as low as a discount of \\$21.50/bl to September CMA Nymex WTI, the deepest discount since 31 July 2014, after holding a discount of \\$19.50/bl yesterday.