California Spot Gasoline Market Jolted as ‘Historic’ Winter Storm Concerns Loom

California Gov. Gavin Newsom on Monday proclaimed a state of emergency to prepare his state for a winter storm season of “historic strength,” as West Coast spot gasoline markets turned increasingly volatile amid speculation the announcement may have prompted some participants to secure supply.

Newsom’s declaration cited forecasts from various weather agencies as the basis for his call for winter preparedness.

The governor pointed to a diagnostic report released in August by the National Oceanic and Atmospheric Administration’s National Weather Service Climate Prediction Center; its forecasters found that the El Niño event is strengthening and presents a “greater than 90 percent chance” of a very strong event striking the region in upcoming months.

The Climate Prediction Center echoed other forecasters in projecting a 69 percent chance that a winter storm event will reach “historic strength” during the last three months of the year — and could break historical records dating back to 1950.

Newsom cited additional expert studies throughout the document, which expressed similar concerns and noted that California is already experiencing the effects of weather conditions conditions including “unusual” precipitation and “significant” coastal flooding.

Monday’s announcement came as volatility emerged throughout the West Coast spot gasoline market.

Sources theorized that gasoline market participants may have caught wind of the news and begun preparing for potential weather-related disruptions by securing CARBOB barrels for storage at GATX, in anticipation of possible supply tightening.

During Monday’s session, Los Angeles CARBOB GATX, representative of a storage barrel, turned 20.5cts higher after trading at a 95.5ct premium to October futures. The regular LA CARBOB barrel was actively talked during the session, but it was left unchanged from Friday’s 74.5ct premium to the screen.

A bid at plus $1.10/gal reported for October-timing San Francisco CARBOB on Monday firmed cash differentials 2.5cts to $1.105/gal above November futures, as premium-blend SF CARBOB swapped hands at 15cts over regular SF CARBOB levels to strengthen basis values 9cts from Friday’s finish.

Pacific Northwest sub-octane also transacted at 8cts and 12cts over October futures Monday, settling the trading day at a 10ct premium and 9cts wider from Friday.

The premium-blend sub-octane barrel also surged Monday, jumping 14.5cts from Friday’s print to plus 25.5cts against the October screen on a bid at plus 15cts versus an offer at 24cts against regular-blend values.

The volatility continued into Tuesday’s session, with the LA CARBOB GATX barrel going without any bids or offers by late afternoon, holding at the last-done value of 95cts above October futures.

Ranges have yet to be reported for Los Angeles CARBOB, which was kept at its 74.5ct premium to October futures.

Meanwhile, October-scheduled San Francisco CARBOB added to Monday’s gains as premiums widened 5cts to $1.155/gal over November RBOB futures on a bid at plus $1.15/gal and an offer at $1.33/gal.

Crashing in the opposite direction Tuesday, prompt Pacific Northwest sub-octane changed hands at a 6ct and 5ct premium to October RBOB futures, holding on the weaker end of the deals and 5cts narrower than the last traded level Monday.

In addition to looming weather concerns, one participant said there was talk of a possible upset occurring at Chevron’s 290,500 b/d El Segundo refinery located near Los Angeles, but that was unverified by company representatives.

“Chevron does not comment on day-to-day refinery operations,” a Chevron spokesperson said. “We continue to supply our customers.”

Another stakeholder cited the product’s upcoming reference month switch, expected to take place later this week. According to the latest Kinder Morgan pipeline schedule, Los Angeles gasoline commodities will roll to October-prompt Thursday morning and jet fuel will begin referencing November ULSD futures Wednesday.

–Reporting by Sydnee Novak, sbeach@opisnet.com; Editing by Dean Visser, dean.visser@dowjones.com