US Gulf heavy naphtha trades at a premium to unleaded gasoline

29 September 2011 20:46  [Source: ICIS news]

HOUSTON (ICIS)--US Gulf heavy naphtha traded at a premium to unleaded gasoline for the first time since 3 March ­– because of thin naphtha supplies and weak spot gasoline prices, analysts said on Thursday.

The US spot heavy naphtha market has been tight because of arbitrage closing from Latin America.

“We were getting exports from Mexico that may have stopped,” said Anne Keller, president of Midstream Energy Group.

In addition, the arbitrage from Europe has been closed for most of the year because of the region’s limited production.

This has caused the US Gulf coast to rely on domestic barges, traders said.

However, less naphtha is available for sale on spot markets because US refinery utilisation rates have declined in recent weeks, according to the US Energy Information Administration (EIA). 

On the spot gasoline side, the seasonal sell-off of summer blends has created a glut in the market.

“Perhaps gasoline marketers were flushing the system of summer-grade gasoline to make room for winter gasoline,” said analyst Dan Lippe of Petral Worldwide. “It’s about that time of year.”

Meanwhile, demand for fuel slipped by 4.4% last week compared with the same time in 2010, and demand has been falling through September.  

Regular gasoline fell to $2.58/gal on 28 September, a drop of 11.3% from $2.91/gal on 2 September.

Naphtha hit a 2 cent/gal premium to Gulf coast pipeline spot gasoline, reaching $2.60–2.61/gal on Wednesday.

Naphtha's premium could be temporary, however.

Lippe said the gasoline supply surplus has caused “a temporary collapse” in spot gasoline prices, but prices will move up and stabilise once refiners empty their summer gasoline storage.

By: Sheena Martin
+1 713 525 2653

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