US VGO premiums rise on widening crude oil price gap

26 January 2012 23:53  [Source: ICIS news]

HOUSTON (ICIS)--Vacuum gas oil (VGO) premiums have increased by 32% since December because of a growing price gap between two grades of crude oil, brokers said on Thursday.

Most US VGO, which is used to make gasoline, comes from Louisiana Light Sweet (LLS) crude oil.

However, VGO spot material is traded by its premium to West Texas Intermediate (WTI) crude oil.

LLS is more expensive than WTI, and its price has been rising more rapidly than WTI.

LLS crude prices climbed to $109.83/bbl on 25 January, from $108.13/bbl on 30 December, while WTI rose to $99.73/bbl from $99.03/bbl.

The $1 jump in the price gap between WTI and the more expensive LLS has caused VGO premiums to rise.

The VGO premium rose to $24.00/bbl on 25 January from $18.25/bbl on 31 December, resulting in a sellers’ market.

Lower US VGO supplies on the Gulf coast have also contributed to the situation.

Production has fallen during refinery turnarounds and incoming VGO shipments have fallen.

Hovensa’s 350,000 bbl/day St Croix refinery in the US Virgin Islands is not longer sending cargoes to the coast since the announcement that the refinery will shut down, and there is very little coming in from Aruba, sources said.

By: Sheena Martin
+1 713 525 2653

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