California retail asphalt prices declined in October as the 590,000 b/d Trans Mountain Expansion (TMX) pipeline altered local crude dynamics.
October prices for Bay Area, Los Angeles and Bakersfield racks dropped by $10/st to $40/st from September and ranged from about 8pc to 13pc below year-prior prices.
October is typically a month with strong demand, and the National Weather Service reported below-normal precipitation levels over the past two weeks. Even so, asphalt prices were pressured lower by a weaker local crude index.
The California state crude oil price index declined by roughly $32/st to $401.40/st for October, its lowest level since September 2021, as TMX becomes a valuable crude source for US west coast refiners.
Retail asphalt prices in California typically follow changes in the state's index, which is linked to the cost of local crude in the Buena Vista and Midway Sunset fields.
The monthly state crude index posting from January to April averaged a $95/st discount to WTI crude futures over the period. From May to October, following the commercial start of TMX, WTI's premium over the state index widened to about $104/st.
The larger differential comes as refiners in California increased imports of Canadian crude even as TMX opened an outlet for oil sands producers to ship to Asia. Canadian crude imports to California refineries have more than quadrupled since the commercial start of the pipeline compared to the same time last year, according to Kpler data.
Some market participants noted TMX crude produces high quality asphalt, but diluents added to improve flow on the pipeline has forced some refiners to limit runs.
US west coast asphalt inventories averaged about 2.7mn bl from May to July 2024, according to the latest US EIA data. This is roughly 2pc below levels seen over the same period in 2023.
