Chicago gasoline climbed to the strongest level in a month, capping the biggest weekly gain since August after refinery rates slipped as a narrower WTI-Brent spread increased costs for Midwest refiners.
Conventional, 85.5-octane gasoline, or CBOB, in Chicago rose 3.5 cents to a discount of 21 cents a gallon versus futures on the New York Mercantile Exchange at 12:40 p.m., the highest level since Nov. 14, according to data compiled by Bloomberg. Conventional, 87-octane gasoline in the Midcontinent, or Group 3 region, climbed 0.38 cent to 31.25 cents a gallon under futures.
Chicago gasoline has gained 29 cents a gallon against futures since Dec. 2 as domestic benchmark crude West Texas Intermediate narrowed its discount to international standard Brent to $12.45 a barrel from $17.63, increasing costs for refiners using domestic or Canadian crude.
Plants in the PADD 2 region, or Midwest, processed 3.56 million barrels of oil a day last week, down 3.5 percent from a record the previous week, the Energy Information Administration reported Dec. 18.
“Because you’re seeing domestic crudes displacing formerly imported crudes, it’s going to force that crude back on the market and should weigh on the Brent,” Steve Mosby, supply manager of ADMO Energy LLC, said by phone from Kansas City, Missouri. “If you can get that spread to compress, then that ought to be good for Midwestern basis. I’m out trying to buy it every time I can.”
Midwestern gasoline, including Chicago, should return to its historical average of 5 cents or 6 cents under futures, Mosby said.
The 3-2-1 crack spread in Chicago, a rough measure of refining margins based on West Texas Intermediate oil in Cushing, Oklahoma, added $2.86 to $14.78 a barrel, according to data compiled by Bloomberg.
The same spread in the Group 3 region gained $1.89 to $12.19 a barrel. Group 3 includes the region north of Tulsa, Oklahoma, to Minnesota and North Dakota.
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