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Houston alkylate edges up, but blending outlook uncertain: trade

Houston (Platts)--20 Apr 2017 433 pm EDT/2033 GMT


  • USGC components inventory bests 25-week average
  • Mixed xylene remains plentiful
  • Wide CBOB-conventional spread discourages blending



US Gulf Coast alkylate was talked at a three-week high Thursday morning, but blendstocks markets remained in the doldrums, with only reformate showing profitability among the three major gasoline components, market sources said.

Blending also lost appeal on a wider spread between CBOB blendstock and conventional gasoline, market sources said. Bidders for alkylate were hard to find Thursday morning, a US refined products source said.

Alkylate for late April and early May FOB Houston was heard talked at pipeline 87-unleaded plus 22.5 cents/gal, up 1 cent from the Wednesday assessment. The last time alkylate was assessed higher was March 28 at 23.5 cents/gal over pipeline gasoline.

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REFINERS HAVE ENOUGH ON SITE


Gasoline blending in the Gulf Coast has been stagnant, with the exception of refiners with ample stocks of components on site, market sources said.

Inventory of gasoline blending components in the region in the week ended April 14 was at 29.01 million barrels, beating its four-, 10- and 25-week averages, US Energy Information Administration data showed this week. Statistics for this week will be released April 26.

"There just isn't a robust market so far this year, or anything, really," a second US refined products source said. "There's a deal here and a deal there, but it's just not like the old days. As long as the refineries are running well, they don't need blenders."

He said US gasoline blenders have been trying to develop export markets.

S&P Global Platts blending models showed that reformate was a profitable blend with 87-unleaded, but alkylate and lower-octane raffinate were unprofitable blends Wednesday. Alkylate would have needed just a 1-cent drop in its outright price to have been a profitable blend, the models showed. It has been an unprofitable blend for 60 consecutive trading days, the models showed.


SELLING OPTIONS FOR MIXED XYLENE LIMITED


Gasoline blend demand from the petrochemicals segment was seen primarily in the mixed xylenes sector as buy interest continued to be seen well below the estimated blend value.

Conventional blend values for toluene and xylene were estimated at near 218 cents/gal as of close of business Wednesday, while April spot mixed xylene prices were assessed midweek at parity to blend values.

With derivative demand from the paraxylene sector lagging and imports continuing to land, the market was under pressure, sources said.

"There is still a lot of MX out there," one petrochemicals source said, adding that there were few options to sell material outside of blenders.

Sources said that commercial-grade toluene was also a viable blendstock, with prices talked at 210-230 cents/gal on an FOB USG basis earlier this week. Nitration-grade values were too high to serve as an appealing blendstock as the market remained relatively snug, sources said.

Sources continued to eye China as talk of a consumption tax on meta-xylenes remained front and center. Some participants posited that this could result in increased exports of aromatics to satisfy octane demand in the country, though others noted that it was likely that this would add length to the reformate markets in Europe and the US and could ultimately hinder demand for toluene and xylene as blendstocks.


PREMIUMS GAIN ON REGULAR


A sign of hope for blenders may be reflected in wider premium gasoline spreads to regular gasoline along the Colonial Pipeline. Conventional gasoline, premium CBOB and premium RBOB at summer RVP have trended higher compared with 87-unleaded this week.

Premium conventional gasoline on the pipeline at Pasadena, Texas, rose against regular conventional by 2.95 cents Wednesday, bringing the regrade to 17 cents/gal, the highest regrade since March 10 at 18.75 cents/gal.

Premium CBOB and premium RBOB rose as well against their regular-grade counterparts, at 18.40 cents/gal and 16.75 cents/gal, respectively. The CBOB premium-regular spread was the widest Wednesday since March 13, and the RBOB spread was the widest since March 22.


BLENDERS WATCH CBOB SPREAD


April non-Targa natural gasoline (C5) was trading at $1.125/gal Thursday morning, about 62.5 points higher than Wednesday's assessment but maintaining its spread to NYMEX May RBOB at a 54.7 cents/gal discount.

Despite the discount to RBOB futures, it's the spread between CBOB and conventional that is discouraging blending with C5, a trade source said.

The conventional gasoline-CBOB spread in the Gulf Coast found a nearly 10-month high Wednesday as conventional and CBOB barrels were assessed 7.90 cents/gal apart. The last time the spread was wider was June 29, 2016, at 8.00 cents/gal.

"It's way too wide. That doesn't leave room for any C5," he said.

CBOB is blended with ethanol in a formula that generally allows for C5 in the mix if the price is right. Platts assesses natural gasoline with 12-14 RVP and maximum 73 octane.

--Jeffrey Bair, jeffrey.bair@spglobal.com

--Kevin Allen, kevin.allen@spglobal.com

--Jennifer Pedrick, jennifer.pedrick@spglobal.com

--Andrea Salazar, andrea.salazar@spglobal.com

--Edited by Annie Siebert, ann.siebert@spglobal.com

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