04-08-2018

USWC–Mexico exports rise on competitive arbitrage

Los Angeles gasoline fell to its narrowest premium over the Gulf coast market in more than six months, making the US west coast a more competitive supplier to west coast Mexico than sellers on the US Gulf coast.

The premium of Los Angeles sub-octane gasoline over Gulf coast Colonial pipeline CBOB fell to 0.88¢/USG on 1 August, the lowest level since mid-January this year. The premium averaged 11.5¢/USG for June, and fell to 3.21¢/USG in the second half of July.

The narrower premium allows west coast sellers to take full advantage of cheaper freight rates to west coast Mexico, making arbitrage more attractive than competing barrels on the Gulf coast. The freight rate from the US Gulf coast to Rosarito, Mexico was $24.30/t on 1 August, compared with $5.26/t from the US west coast.

The narrowing spread between these markets competing to supply west coast Mexico followed a period of unplanned refinery disruptions on the Gulf coast and smooth operations on the west coast. Over the past three weeks Gulf coast refiners operated at an average of 93.8pc, while west coast operators ran at an average of 97.7pc, according to the US Energy Information Administration (EIA).

Gulf coast refineries with operational issues at that time included ExxonMobil’s 560,500 b/d Baytown, Texas refinery, Total’s 240,000 b/d Port Arthur, Texas, refinery, and Phillips 66’s 247,000 b/d Sweeney, Texas, refinery.

In addition to robust regional production, the Alpine Mathilde, arrived in Portland, Oregon, this week, carrying gasoline from Point Tupper, Nova Scotia.

Two cargoes from Texas are expected to offload gasoline on the west coast of Mexico this week, the PTI Amazon and the Ardmore Endurance. This compared with three similar cargoes originating from Washington and California, the Rainbow Star, the Torm Lotte, and the PTI Hercules, fixture reports show.

On the US Gulf coast, cargoes continue to be fixed for other west coast Latin American destinations. The Nord Oceania is fixed to load gasoline to Peru, and the Eternal Sunshine is expected to cross the Panama Canal early next week before offloading in Ecuador.

Source: Argus

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