Midwest Spot Prices Vulnerable as Explorer Outage Drags


   
   SECAUCUS, NJ (DTN) -- Market participants in the Midwest remain mired in an 
operational standoff following an outage on the Oklahoma-originating Explorer 
Pipeline, leaving spot traders reliant on futures markets for immediate price 
direction.

   Without official guidance on when pipeline fuel transfers will resume 
northward from PADD 3 into PADD 2, physical spot traders remain vulnerable to 
futures volatility on NYMEX when pricing prompt differentials for diesel, jet 
fuel, and gasoline.

   In Tuesday (8/25) trading, ultralow sulfur diesel (ULSD) for September on 
NYMEX was down 2.18cts, or 0.5%, to $4.2459 gallon by 2:20 p.m. ET.

   Accordingly, offers for Midwest Group 3 ULSD were talked at a 12.50cts 
discount to the NYMEX front-month, widening from morning indications of 10cts 
gallon.

   With Gulf Coast shippers largely absent from the region, the persistent 
midstream flow void from Glenpool has stripped depth from Midwest spot trading.

   As true price discovery is sidelined ahead of harvest demand, pricing power 
has effectively shifted to major refiners holding firm offers against minimal 
transaction volume.

   "I think for the most part, the refiners are kind of setting the market, or 
the illiquidity of the market is setting the market," a Midwest fuels trader 
told DTN. "It's one of those two indicators."

   The 1,830-mile pipeline, which transports refined petroleum products 
northward into the Midwest, has been crippled since an August 17 fire that 
knocked out three natural gasoline tanks at its Glenpool tank farm in Tulsa, 
Oklahoma.

   In an update Monday (8/24), Explorer Pipeline Company said the Glenpool site 
has transitioned into a "project management recovery phase" following the fire, 
though no timeline was provided on its restart.

   Market observers warn that any extended delay in restoring Glenpool's 
operations could transform the current pricing standoff into an acute physical 
supply squeeze as Midwest harvest demand accelerates.

   The midstream impasse intersects with an already tight PADD 2 network, which 
continues to absorb processing issues at Phillips 66's 356,000 bpd Wood River 
refinery in Roxana, Illinois, alongside throughput limits at the Lamar 
crossover hub.




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