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California gasoline stocks rose even as prices surged

(Reuters) - California's refiners increased their stockpiles of gasoline by more than 5 percent last week, despite a drop in production that fuelled an unprecedented spike in prices, state data showed on Thursday.

Total inventories of specially made ultra-clean CARBOB fuel rose to more than 5 million barrels for the first time in four weeks, although supplies were still 8 percent lower than a year ago, according to data from the California Energy Commission for the week to October 5, which was one day after prices peaked.

It said refiners produced 6.3 million barrels of the fuel, 5.6 percent less than a week before, but about the same as last year. Total refinery runs dipped by just 1.3 percent.

The data, which is in line with broader federal government figures released earlier in the day, sheds new light on the record surge in California's wholesale gasoline prices last week, when spot market premiums surged by more than $1 a gallon and pushed retail rates to over $5 in some places.

The figures generally support the idea that unexpected refinery outages triggered a brief bout of panic buying in a market already tight due to low inventories. Traders also say that a shortage of summer-quality fuel exacerbated the problem as many refiners were already stocking up on winter-grade fuel. The data doesn't break down gasoline by specification.

"CARBOB was tight, all other grades of gasoline were well supplied," said one trader, who asked not to be identified.

But the rise in stockpiles also shows that supplies were not uniformly tight, potentially spurring more questions from politicians who are calling for a federal investigation into possibly nefarious trading during the period.

The slight drop in utilization corresponds with a glitch at Exxon Mobil Corp's 149,500 barrels-per-day (bpd) refinery in Torrance, California, which accounts for nearly 8 percent of the state's capacity. On October 1, the refinery suffered a blackout that traders say spooked the market. Operations are only now resuming in full.

CARBOB premiums have tumbled this week just as quickly as they rose, aided by California Governor Jerry Brown's decision on Sunday to allow an immediate switch to "winter-blend" fuel that refiners can produce more readily.

On Thursday, gasoline's differential in the Los Angeles wholesale market rose just 4.5 cents to 45 cents, only a bit higher than a month ago. The premium had surged to as much as $1.45 last week, the highest on record.

W.COAST STOCKS RISE TOO

Earlier in the day, the Energy Information Administration's (EIA) weekly supply and demand report showed that refiners in the PADD 5 region, which includes California, Washington and Oregon, as well as seven refineries in Alaska and Hawaii, saw their total utilization rate dip by 1.2 percentage points to 83 percent. That is the lowest rate since May, but still up from near 77 percent a year ago.

It also showed that net production of finished motor gasoline by refiners and blenders actually rose last week to 1.57 million barrels-per-day, suggesting that other plants may have compensated for any outages.

Overall, West Coast (PADD 5) gasoline stocks fell just 231,000 barrels last week to 26.4 million barrels, according to the EIA. It was the lowest level since mid-August, one week after the Chevron Corp refinery in Richmond -- the state's second largest -- lost its main refining unit.

Because of California's specific fuel qualities, gasoline produced in nearby states cannot be sold in the state's gas stations. California refiners also export to Mexico gasoline that does not meet the state's stringent standards, which may have further distorted the weekly government data.

Throughout the week, traders said the shortages were concentrated in the Los Angeles area and seemed to affect one refiner, Tesoro Corp, which was caught in a "short squeeze" by its competitors.

"That's a weekly change in inventory and doesn't address some physical players getting caught short that did lead prices up," said another trader.

(Reporting by Selam Gebrekidan and Erwin Seba)

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