By Brian L. Milne, Energy Editor, Schneider Electric
Spot prices for gasoline in the Chicago market spiked to better than 4-1/2 year highs in starting the first week of June before dropping back on data points showing increased processing at Midwest refineries, while wholesale gasoline costs at major metropolitan markets across the U.S. were mostly higher buoyed by a near 10 cents weekly gain in benchmark futures.
Rack postings—the supplier offer price at fuel distribution terminals, moved up 4 cents from June 3 through June 10 in the Chicago market while the spot price for conventional blendstock for oxygenate blending slide nearly 18 cents or 5% from June 4 when it ended at a record high of $3.6151 gallon. Spot pricing for conventional regular that holds parity with CBOB shows the June 4 high was the highest since a brief spike to $4.23 gallon on Sept. 12, 2008—the Friday before news broke of the Lehman Brothers collapse.
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CBOB, which needs 10% ethanol blended into the baseline grade before becoming finished gasoline, is now the primary gasoline grade in Chicago instead of conventional regular due to an increasing federal mandate to use more renewables in the transportation fuel sector.
Midwest gasoline prices have surged in the second quarter on low gasoline supply for the region amid major upgrading work and scheduled maintenance at refineries that converged with a handful of unplanned refinery outages in May. Chicago’s spot market had also spiked in mid-May, with CBOB gaining to just shy of $3.30 gallon on tight supplies on May 20 before easing back.
Spot gasoline prices for the Windy City were pressured on data from the Energy Information Administration (EIA) released June 5 showing a 4.6% jump in the PADD 2 Midwest refinery run rate from an historical low to 83.4% of capacity during the week-ended May 31. Midwest refiners processed 183,000 bpd more crude oil during the last week of May than the prior week, although at 3.199 million bpd trail the comparable year-ago processing rate of 3.407 million bpd.
The data suggests more gasoline supply would come to the regional market, pressuring Chicago spot prices from their recent highs.
Nationwide, gasoline prices found upside footing on supportive inventory statistics for the final week of May and on sentiment gaining currency that the Federal Reserve would not begin an earlier than expected retreat from its $85 billion a month bond buying program.
About the Author
Brian L. Milne is the Energy Editor for Schneider Electric—a leading business-to-business provider of real-time commodity information services among many other activities. Milne has been focused on the energy industry for 17 years as an analyst, journalist and editor. He can be reached at firstname.lastname@example.org.