USWC Fuel Market Volatile on Seasonal Spec Changes


   
Kristina Davis
DTN Refined Fuels Market Reporter

   MIAMI, FL (DTN) -- The U.S. West Coast fuel market remained volatile in 
October  as refiners completed the seasonal transition from summer-grade to 
winter-grade gasoline, a process that often disrupts supply balances and 
trading dynamics across the region.
The shift, mandated by environmental regulations, allows refiners to produce 
fuels with higher Reid Vapor Pressure (RVP) in cooler months to enhance vehicle 
performance.

   However, that transition also typically forces refiners to draw down summer 
grade inventories before introducing winter grade blends, leading to temporary 
tightness and price swings.

   Los Angeles CARBOB traded at a 71 cents premium to December NYMEX RBOB 
futures on Friday (10/31)  - the highest since early September - reflecting 
continued tightness and uneven inventory levels across the U.S. West Coast as 
refiners complete the seasonal transition to winter-grade gasoline.

   The sharp premium also marks a significant widening from August levels, when 
Los Angeles CARBOB spot differentials traded at a 10 cents premium to September 
NYMEX RBOB futures.

   Chevron's 269,000 bpd El Segundo refinery a key supplier of transportation 
fuels for Southern California has faced multiple incidents this month. This 
includes a flaring event on October 21, which was reported to the South Coast 
Air Quality Management District with the cause listed as "initial determination 
unknown."

   Earlier this month, the refinery experienced additional flaring on October 
9, 14, and 15, following an October 2 explosion that impacted the Isomax 7 
hydrocracking unit, critical for producing jet fuel and gasoline. The facility 
supplies about 20% of Southern California's gasoline and 40% of its jet fuel, 
making any operational setbacks highly consequential for regional pricing.

   Jet fuel markets have mirrored this disruption in its price volatility. Los 
Angeles jet fuel basis now stands at 25cts premium to December NYMEX RBOB 
futures, supported by tight supply fundamentals linked to the ongoing flaring 
and constrained output at El Segundo. Earlier in the month, jet fuel basis 
briefly spiked to 35cts premium over November futures before retreating, as 
traders cited limited availability and disrupted deliveries.

   Logistical challenges, including restricted terminal storage and staggered 
delivery schedules, have further amplified volatility across Los Angeles and 
San Francisco markets. Similar conditions have been observed in the Pacific 
Northwest, where cooler temperatures have accelerated the switch to 
winter-grade gasoline.
While the seasonal shift is expected to stabilize by mid-November, market 
participants say lingering refinery issues and thin inventories could keep West 
Coast fuel premiums elevated into early winter.

    

    




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