Gasoline prices in the Midwest should fall in the coming days after hitting record highs in several cities last week in the run up to Memorial Day, the traditional start to the summer driving season, traders and industry analysts said on Wednesday.
Problems at regional refineries, declining gasoline stockpiles and delays of shipments into the region from the Gulf Coast helped boost prices last week, prompting market players to hoard what fuel they had.
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In some parts of the Midwest, prices have already slipped, according to Gasbuddy.com, which monitors prices through consumer input. In Minneapolis, the average price per gallon has fallen to $4.26 from an all-time high of $4.32.
Prices at the pump across the United States are underpinned by an intermediate market moving gasoline and other fuels between a refiner and a supplier. Those trades are expressed in the deficit or premium of the fuel to its futures contract on the New York Mercantile Exchange.
The so-called differentials for gasoline in the Group Three market, which encapsulates most Midwestern states, have been falling fast since last Friday. Differentials for the Chicago market have also retreated although in a less-steady manner.
"This will certainly mean that retail prices will likely in the days and weeks ahead give up some of their ground," said Patrick DeHaan, a petroleum analyst with Gasbuddy.com.
"Group Three will probably come off more significantly, by 10-20 cents a gallon, in the next week and a half. There's potential for more, depending on market."
Refinery outages were planned at Exxon Mobil Corp's refinery in Joliet, Illinois, and at HollyFrontier Corp's Tulsa East refinery in Oklahoma.
Companies tend not to say when their refineries have been shut down or restarted unexpectedly, but industry analysts including Genscape thought there were also issues at HollyFrontier's El Dorado, Kansas, refinery, Citgo's LeMont Refinery in Illinois, and Phillips 66's Wood River, Illinois, refinery.
"It's likely that the refineries that were suffering from unexpected issues are probably back on line," DeHaan said.
Group Three gasoline differentials fell 24 cents a gallon since Monday to 22 cents over June RBOB gasoline futures after rising almost half a dollar last week. Differentials tend to move by just a few cents each week under normal circumstances.
"Group (Three gasoline) was way to high. It should be cheaper than Chicago. It's going to keep falling as supply improves," one trader said.
Group Three gasoline differentials were below Chicago's on Wednesday for this first time since last week's rally. Chicago differentials rose half a cent to 26 cents over the same futures contract but are still lower than a peak of 37 cents last week.
(Reporting by Sabina Zawadzki in New York; editing by Jim Marshall)