Gasoline standard relaxes winter distillation temperature
Light naphtha, butane demand on the rise
US gasoline suppliers are grappling with the latest change from technical standards association ASTM International, specifically D4814-24a, which relaxes the minimum 50% evaporated distillation temperature (T50) from 150 degrees Fahrenheit to 145 degrees Fahrenheit. For gasoline without ethanol, the T50 minimum remained at 150 degrees Fahrenheit.
Not registered?
Receive daily email alerts, subscriber notes & personalize your experience.
The change could allow for blending higher volumes of lighter components, such as butane and natural gasoline. However, a patchwork of states has emerged, with some adopting the standard while others have not.
“It is more about supply and margin dynamics driving prices. If you can blend more butane into gasoline, you can produce more gasoline, and this could potentially drive to low prices,” a source told Platts.
Light components such as butane and natural gasoline began strengthening against gasoline at the start of the transition to winter grades. Butane, in particular, showed an unusual backwardated market structure, suggesting more demand for delivery of the front-month product.
Sources have said that strong naphtha and butane are making gasoline blending more challenging, reducing the opportunity to include high-octane components such as butane and alkylate, which leads to narrower high-low octane spreads.
The October average discount between the October Mont Belvieu Enterprise butane and the Gulf Coast CBOB gasoline is at $1.0456/gal, the narrowest since December 2023, when it averaged 93.4 cents/gal.
The butane market structure for November delivery shows a 0.77-cent backwardation against October, and the 1Q 2025 swaps shows an additional 2.85-cent backwardation relative to the November physical product. In October 2023, November product was in a 2.74-cent contango against October, and the 1Q 2024 swap was in a 0.85-cent backwardation against the November physical product.
Light naphtha shipping via Colonial Pipeline to blend gasoline in the Northeast increased after Colonial announced the waiver to accept the 145-degree material, sources said.
The light naphtha market balance depends on exports for heavy crude oil dilution in Canada and South America, as well as exports and domestic demand for gasoline blending.
The spread between the October Mont Belvieu Enterprise natural gasoline and the Gulf Coast CBOB averages so far 47.9 cents/gal, while in October 2023 the discount was 60.7 cents/gal.
November natural gasoline averages a 0.17-cent contango against the October product. Last year, the same spread averaged a 0.81-cent contango.
About reformer and standard naphtha prices, those have been highly driven by exports to Venezuela and Colombia, where they also use it to dilute heavy crude oil, leaving the market “dry of heavy naphtha,” sources said.
US Gulf Coast naphtha prices began an upward rally, strengthening against gasoline since the week ended Sept. 27 amid buying interest, reaching record-high levels for the spread against the NYMEX RBOB futures contracts.
Some US Pipelines systems to update their product codes
The Colonial Pipeline said it would continue to enforce the 150-degree standard but issued a waiver at the end of September allowing the 145-degree minimum product to be shipped.
“Until all states served by Colonial make changes that align with the new specification, we will continue enforcing the 150-degree standard in our current Product Codes and Specifications. All products in our system have continued to meet the 150-degree specification,” the company told Platts.
Colonial also said they will update their product codes accordingly and will issue an announcement when adopted.
Buckeye Partners said they adopted the new 145-degree minimum specification but issued a waiver to allow the 150-degree minimum product as the products do not require segregation, the company told Platts. The waiver will be in place until the official specification change is published in their Shipper’s Notebook.
In the Midwest, ONEOK, which recently acquired Magellan Midstream Partners and its extensive Midwest pipeline system, is not allowing the relaxed 145-degree specification. Additionally, the Explorer Pipeline has not yet decided about what they will do about the new specification and is allowing both products to run in their pipeline.
Midwest shows biggest impact on prices
As of mid-October, Illinois had adopted the new ASTM standard, while Wisconsin was still in deliberation. The misalignment of the two states has divided the Chicago complex system as the West Shore and Badger pipelines maintain the Wisconsin specification, while Wolverine and Buckeye Complex conform to the updated T50 standard in line with Illinois.
The updated standard could bring some relief to the Midwest gasoline complex, according to sources, as it could allow for more supply in the constrained region, although the change to the gasoline formulation does not necessarily mean a change to prices, a source added.
Indications were heard in the market placing Wisconsin specification gasoline to be delivered in Chicago at a premium, with Illinois spec at a discount of 1-5 cents/gal. The spread between the two specs narrowed throughout the week ending Oct. 4.
The Oklahoma Group 3 gasoline has not shown atypical activity so far.
“We will see more impact from T50 as we move into winter, when the Reid vapor pressure is at 13.5 psi and 15 psi,” one Midwest gasoline source said.