US gasoline cracks fall to negative territory: Update

Market: Oil products
17/03/20

Adds RBOB settle, detail on direction of trade in final paragraph.

Benchmark gasoline prices fell below regional crude settlements yesterday in major US fuel markets, a rare spring inversion responding to the demand destruction of a global effort to contain the spread of the new coronavirus.

Regional sweet benchmark crudes settled higher than corresponding gasoline benchmarks in the US Atlantic, Gulf and west coasts and the midcontinent, based on Argus assessments. Gasoline in each case was worth less than a barrel of certain sweet crudes purchased to produce it. The fuel retained a premium to sour crude benchmarks in the US Gulf coast, midcontinent and in the Los Angeles, California, market. Overall refining crack spreads — a measure of refinery profitability — were sharply lower but kept positive on the strength of diesel margins.

Cities have ordered residents to shelter in place, states have closed restaurants and bars, and the federal government yesterday urged anyone able to work from home for the next two weeks to do so to limit the spread of the coronavirus. Deep cuts to gasoline consumption were inevitable, though not yet quantified by the Energy Information Administration.

The gasoline discounts to crude happen occasionally, including last February in the New York Harbor, US Gulf coast and midcontinent markets. The reversal more often occurs in January or February, when US gasoline demand shrinks. But they last happened at the same time across these four regions in December 2014.

A barrel of Buckeye RBOB in the New York Harbor fell to a $3.23/bl discount to Brent. Colonial M grade conventional gasoline fell to a 56¢/bl discount to WTI Houston and a 36¢/bl discount to Light Louisiana Sweet (LLS). San Francisco CARBOB dropped to a 18¢/bl discount to Alaskan North Slope (ANS). No market began March below a $5/bl premium to their respective regional crude.

Diesel premiums to crude settled yesterday above the five-year weekly average in the Atlantic and west coasts. But refinery margins yesterday settled at least 50pc lower than that same five year average period in every region.

The Nymex April RBOB contract settled today at 71.14¢/USG, higher by 2.15¢/USG than the previous settle. Regional differentials to that benchmark were falling in the US Gulf coast, Chicago and San Francisco markets. New York Harbor Buckeye RBOB was slightly higher from yesterday's midpoint in afternoon trade.

By Elliott Blackburn

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Houston, 2 May (Argus) — Chevron's chief executive said today he is not surprised that refineries in California are shutting down, because the state has made it "nearly impossible" to invest going forward. Independent refiner Valero on 16 April said it is planning to shut or re-purpose its 145,000 b/d refinery in Benicia, California, by April 2026. This comes as Phillips 66 is planning to shut its 139,000 b/d Los Angeles refinery later this year. "I'm not surprised to see the announcements that have come out," chief executive Mike Wirth said Friday on Chevron's first-quarter earnings call. Policies coming out of the state "make it nearly impossible to invest in California going forward", he said. The state inserting itself into operational matters like planning turnarounds is "an unwise move", Wirth said. Chevron operates two large refineries in the state — the 269,000 b/d El Segundo, refinery and the 245,000 b/d Richmond refinery. "We do not have any announcements on our refineries at this time," Wirth said. California governor Gavin Newsom last year signed into law AB X2-1, legislation authorizing the state's energy regulator to require refiners to maintain minimum gasoline inventories. The bill is part of a multi-year effort by Newsom to mitigate price spikes at the pump, authorizing the California Energy Commission (CEC) to regulate, develop and impose requirements for in-state refiners to maintain minimum stocks of gasoline and gasoline blending components. The agency is in the rule-making process for some of the regulations, but a vote on a refinery resupply rule was postponed last month to allow for more engagement with stakeholders. The closures of Valero's Benicia refinery and Phillips 66's Los Angeles refinery will eliminate 17pc of the state's crude refining capacity. PBF Energy, which also operates refineries in California, said Thursday that the shutdowns will cause a 250,000 b/d shortfall in gasoline in the state and lead to growing reliance on more expensive imports. Valero chief executive Lane Riggs said last week that California's regulatory and enforcement environment is "the most stringent and difficult" in North America due to 20 years of policies pursuing a move away from fossil fuels. California will require 100pc of in-state sales of new cars and trucks to be electric, plug-in hybrid or hydrogen models by 2035. Five days after Valero's announcement to shut Benicia, Newsom urged state regulators to work closely with refiners on short-term and long-term planning, including through "high-level, immediate engagement" to make sure Californians have access to transportation fuels, according to a letter sent to CEC vice chair Siva Gunda. Newsom ordered the CEC to work with a cross-agency task force to recommend by 1 July any changes in the state's approach that are needed to ensure adequate fuel supply during the state's energy transition. By Eunice Bridges Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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