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Gasoline finds backward slide through November in Midwest, USGC

Houston (Platts)--13 Nov 2017 610 pm EST/2310 GMT


Tulsa, Oklahoma, gasoline Monday flipped to a discount to front-month futures for the first time in six weeks, with shorts supporting the prompt barrel while the expectation of larger refinery output undercut blendstock at the back end of the curve.


  • Tulsa blendstock flips to discount to futures
  • 'Extreme backwardation' attributed to shortage of prompt barrels
  • With CBOB weaker, Colonial Pipeline line space climbs

Prompt suboctane blendstock at 13.5 RVP on the Magellan pipeline system at Tulsa fell 50 points to NYMEX December RBOB minus 0.50 cent/gal on a late morning trade at that level.

The differential now has fallen nine straight trading days, with refiner selling pressuring the cash market during much of that process.

The market for the November any suboctane barrel began to develop, with backwardation established at an unseasonably high 30 points/d through the end of the month. November any suboctane was heard offered at NYMEX December RBOB minus 5 cents/gal, establishing a 4.75-cent discount to the prompt barrel.

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Typical backwardation at this time is 10 to 20 points/d. Suboctane typically reflects backwardation ahead of the shift to 15 RVP product in early December.

Contributing to the steeper curve was a shortage of prompt barrels in Tulsa and the expectation that several refinery projections in the region are about to be finished, market sources said.

Strong differentials in Chicago also contributed to support for the prompt barrel, with Tulsa product able to be shipped northward.

"The backwardation is extreme right now," a US refined products source said. "And generally the 'V' is being offered into a vacuum these days."

The outright for suboctane fell 2.45 cents to $1.9929/gal and missed its 10-day average for the first time since October 4. Outrights have been running about 60 cents above where they were at this time a year ago.

In sympathy with the Midwest, USGC CBOB also has weakened since the start of November. Platts assessed the benchmark at December futures minus 6.75 cents/gal Monday, down 4.25 cent from its November 1 assessment. Platts also assessed CBOB forward cycles on the Colonial Pipeline in a backwardated market structure Monday, which signals CBOB likely will move lower heading into the rest of November.

Backward CBOB at Houston supports the story line of backwardation in the Midwest, with many of those barrels destined to be shipped to Tulsa in the next two weeks.

Gasoline differentials and space on Colonial's gasoline-only Line 1 typically have an inverse relationship and as CBOB weakened Monday, Line 1 space was assessed at a year-to-date high of 1 cent/gal after trading at that level several times prior to the MOC assessment process. Line 1 space was last assessed above 1 cent/gal December 20, 2016, when it closed at 1.5 cents/gal, according to Platts data.

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

--Seth Clare, seth.clare@spglobal.com

--Edited by Valarie Jackson, valarie.jackson@spglobal.com




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