Gasoline cracks rally as Texas cold snap takes out 1.2m bpd of capacity

Quantum Commodity Intelligence - Valero's Houston Refinery has been the latest in a series of plant outages which took off 1.2 million bpd of refining capacity in Texas as the state's power grid buckles under the frigid weather, triggering a further rally in gasoline cracks.

The 255,000-bpd refinery located on the Houston Ship Channel was hit by an "unanticipated loss of power" on Monday morning, triggering a flaring at the site, the company said in an emissions report to the state of Texas.

It follows a previous incident at Valero's 260,000-bpd Texas City refinery which was hit by a power cut last Friday as the state was hit by an arctic blast which resulted in "multiple process upsets" at the site, the company said in a separate filing.

"The power failure was sudden, unforeseen and beyond the control of Valero," the company said, as it has been working to get the plant back to full capacity which may take several days.

The outages have propelled the RBOB gasoline crack for February to a fresh high of $27.7/b by the Asia close on Tuesday and surpassing the highs of $23/b seen during the US driving season last month, Quantum data showed.

Global cracks followed in its wake, with the February 92RON FOB Singapore, crack jumping $0.52/b to $13.31/b while the Eurobob crack jumped to $13.89/b at the same time – their highest since last July.

A cold front, bringing temperatures of -10 degrees Celsius, hit the state at the end of last week, putting strain on the power grid as Texas Governor Greg Abbott warned "no one can guarantee" there won't be power outages this winter.

The two latest outages were compounded by outages at Marathon's 593,000-bpd Galveston Bay refinery and Chevron's 110,000-bpd Pasadena refinery, which were both hit by power cuts and shut down at the end of last week due to the cold weather.

While Marathon restored the steam supply to the US' second-largest refinery on Monday evening, but it is expected to take at least two weeks for the plant to return to full capacity, assuming there has been no damage following the power outage, according to reports.

And while nationwide gasoline stocks have climbed higher over the past weeks to bring them back in line with the five-year average, inventories in the Gulf Coast are at the lower end of their five-year range at 85 million barrels, EIA data showed.

Utilization rates in the Gulf Coast had slipped to 86.9% in the week before the cold slap – below the nation's average of 87.7% - although this is more a reflection of the upcoming maintenance season.

Marathon declined to comment on the operations of the Galveston Bay refinery, while Valero did not respond to questions by time of press.