USWC Summer Fuel Markets Cool as Supply Concerns Ease


   
Kristina Davis
DTN Refined Fuels Market Reporter

   MIAMI, FL (DTN) -- U.S. West Coast fuel markets are entering the summer 
driving season on a much calmer note than many traders expected earlier this 
year, as improving inventories and a lack of major refinery disruptions have 
helped ease supply concerns that pushed gasoline, diesel and jet fuel values 
sharply higher during the spring.

For much of April and May, refinery maintenance, flaring events and concerns 
over the region's shrinking refining system supported strong premiums across 
West Coast fuel markets. In June, however, the trend has begun to reverse.

The biggest move has come in diesel. San Francisco ULSD basis fell 35cts on 
June 9 to a 5cts premium over July NYMEX ULSD futures, its lowest level since 
March 24, 2026. The decline erased much of the risk premium that built up 
earlier this year when refinery issues tightened supply and pushed diesel 
values higher.

Gasoline markets have also softened. Los Angeles CARBOB regular traded as low 
as a 22cts premium to NYMEX RBOB futures on June 10 before recovering slightly 
to a 24cts premium. Further north, Pacific Northwest sub octane basis fell 8cts 
on June 16 to a 9.5cts premium, its lowest level since March 25, 2026.

Jet fuel has moved lower as well. Los Angeles jet fuel basis dropped to an 8cts 
discount against July NYMEX ULSD futures on June 10, down 5cts on the day. The 
move stands in contrast to last summer, when operational issues at Chevron's El 
Segundo refinery contributed to tighter jet fuel supplies and stronger premiums 
across the region.

A major factor behind the recent weakness has been the lack of refinery 
disruptions. Unlike earlier this spring, there have been few significant 
flaring events or unplanned outages reported at major West Coast refineries in 
recent weeks. With fewer operational issues making headlines, traders have 
become more comfortable with the region's near-term supply outlook.

Inventory data have also offered some support. EIA data released June 17 showed 
PADD 5 gasoline inventories climbed by 700,000 bbl to 28.0 million bbl during 
the week ended June 12, rebounding after five consecutive weekly declines. 
While inventories remain 1.2 million bbl below 2025 levels, the increase helped 
reinforce the view that gasoline supplies are improving as summer demand ramps 
up.

Crude oil inventories increased by 1.3 million bbl to 45.2 million bbl during 
the same period. Distillate inventories fell by 200,000 bbl to 10 million bbl 
and were 600,000 bbl lower than a year earlier, while jet fuel stocks slipped 
by 100,000 bbl to 10.9 million bbl and were 900,000 bbl below levels reported a 
year ago.

Refinery utilization in the region declined to 85.3% from 93.4% the previous 
week. Even so, inventories remained relatively stable, suggesting refiners are 
keeping pace with demand despite lower run rates.

The recent pullback in fuel premiums marks a significant shift from the market 
conditions seen just a few months ago. While the West Coast still operates with 
less refining capacity following the closure of Phillips 66's 139,000 bpd 
Wilmington refinery and the ongoing shutdown of Valero's 145,000 bpd Benicia 
refinery, recent trading activity suggests the market is becoming less focused 
on supply risks and more focused on improving fundamentals.

That could change quickly if a major refinery outage occurs during the peak 
summer driving season. With fewer refineries available to absorb unexpected 
disruptions, the region remains vulnerable to supply shocks. For now, however, 
improving inventories, softer spot values and the recent absence of significant 
refinery flaring have allowed West Coast fuel markets to enter summer with 
considerably less concern about fuel availability than earlier this year.

    




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