* Gulf gasoline down as demand wanes, grade switch looms
* Chicago ULSD pares decline
* Harbor markets mixed as traders wrap February business
HOUSTON, Feb 29 (Reuters) - Gulf Coast gasoline differentials extended declines on Wednesday as demand waned for the transitional winter-to-summer grade that will be phased out next month.
M3 gasoline differentials fell by 2.00 cents per gallon to 23.00 cents under the April RBOB futures contract on the New York Mercantile Exchange, traders said.
The M3 grade will phase out in March as the cleaner burning, lower Reid vapor pressure (RVP) M2 summer grade takes over. M2 was seen done Wednesday at 18.50 cents under, traders said.
Gulf Coast ultra-low sulfur diesel differentials climbed a penny per gallon to half a cent under April NYMEX heating oil futures, while jet fuel differentials slipped half a cent per gallon to 0.50 cent under.
In the Midwest, Chicago ultra-low sulfur diesel shot up by 9.00 cents a gallon in volatile afternoon trading that saw exceptionally strong buying interest.
Chicago ULSD was thus seen at a wide bid/offer spread of 25.00/20.00 cents under April heating oil futures, traders said.
Meanwhile, Chicago gasoline partially corrected its 6.00-cent rally from Tuesday and fell back 2.00 cents a gallon to 20.00/18.00 cents a gallon.
The Midwest markets shrugged off tornadoes that ripped through at least four states in the region late on Tuesday, but spared refinery infrastructure.
In the New York Harbor on Wednesday, cash distillate markets were mixed as traders said they wrapped up February business and began March trade with no clear trends seen.
Prompt and any-March heating oil were talked at flat to 0.50 cent over the April heating oil futures contract on NYMEX in limited trade. Prompt Buckeye barrels were seen done at flat to the screen.
Prompt March jet fuel fell 1.75 cents as buyers backed away from sellers’ lofty price ideas and the market was pegged at either side of 5.50 cents over by the end of the day on Wednesday.
Prompt March ULSD shed it earlier quarter cent gain and ended the day unchanged at 4.00/4.50 cents over.
East Coast gasoline stocks fell by 1.5 million barrels last week, according to the U.S. Energy Information Administration’s weekly inventory data release on Wednesday, but cash gasoline markets in the region shrugged it off as traders focused on closing books on February trade.
With February trade essentially done early in the day, the Harbor gasoline market shifted its attention to March business. Prompt F5 RBOB was pegged at 20.75/20.25 cents under the April RBOB futures contract, down an half cent, while barrels loading by Mar. 5 were called 21.00/20.50 cents under.
March is the transition month between high RVP winter grade F5 material and lower RVP spring grade F4 material, so two grades of RBOB are quoted.
Prompt F4 RBOB was called 2.75/2.25 cents under, while any-March barrels were pegged at either side of 0.50 cent under.
The EIA said U.S. distillate and gasoline stocks each fell last week as refinery utilization decreased.
U.S. distillate stocks fell 2 million barrels to 141.4 million barrels while gasoline stocks slipped 1.6 million barrels to 229.9 million barrels, the EIA said.
The drop in East Coast gasoline inventories drove the overall decline in U.S. inventories. East Coast distillate stocks fell by 685,000 barrels, the EIA said.
Midwest distillate stocks fell by 355,000 barrels while Midwest gasoline stocks fell by 548,000 barrels.
However, Gulf Coast distillate and gasoline stocks each showed gains. Distillates rose by a slight 92,000 barrels, and gasoline inventories were up by 792,000 barrels, the EIA said.
U.S. refinery utilization dropped 1.9 percentage points to 83.6 percent last week on various upsets as well as ongoing spring maintenance.
Gulf Coast utilization slipped 2.3 percentage points to 85.6 percent, due partly to reduced rates of a gasoline-making fluid catalytic cracking unit at Shell Oil Co’s joint-venture 327,000 barrels-per-day (bpd) refinery in Deer Park, Texas.
Midwest utilization fell 1.8 percentage points to 94.2 percent as ConocoPhillips reported a sulfur plant F-train trip at its joint-venture 362,000 bpd refinery in Wood River, Illinois.
But East Coast utilization showed a slight uptick of 0.7 percentage points to 58.3 percent as Hess Corp’s 70,000 bpd refinery in Port Reading, New Jersey, had resumed normal operations upon wrapping up planned work.
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Cycle 14 m3 gasoline was seen done at 21.00, 22.00. 22.75 and 23.00 cents under April RBOB futures, down 2.00 cents.
Cycle 15 M2 gasoline was seen done at 18.50 cents under.
Cycle 13 61-grade ultra-low sulfur diesel was seen done at 0.25 cent under, then 0.40 and 0.50 cent over the April heating oil screen, up a penny.
Newly prompt Cycle 14 jet fuel was seen done at 0.50 cent under, down half a cent.
Cycle 14 heating oil was steady at 5.25/4.75 cents under.
Prompt March heating oil was called flat to 0.50 cent over, up a quarter cent.
Prompt March ULSD was pegged at 4.00/4.50 cents over, unchanged.
Prompt and any-March jet fuel were pegged at 5.25/5.75 cents over, down 1.75 cents.
Prompt and any-March kerosene were called 8.00/9.00 cents over and March ultra-low sulfur kerosene was talked at 11.50/12.50 cents over.
Prompt March F5 RBOB was pegged at 20.75/20.25 cents under, down a quarter cent, while barrels loading by Mar. 5 were talked at 21.00/20.50 cents under. F5 RBOB loading by Mar. 20 was called 20.00/19.50 cents under.
Prompt March F4 RBOB was pegged at 2.75/2.25 cents under, unchanged, while any-March barrels were called either side of 0.50 cent under, up a quarter cent.
Ratable March F4 RBOB was done at 20.00 cents under, down a quarter cent, while ratable April F2 RBOB was talked at flat to 0.50 cent over May RBOB futures.
Prompt March M4 conventional was done at 1.00 cent over April RBOB futures, up 0.25 cent, while any-March barrels were pegged at 17.75/17.25 cents under, down a half cent.
Cycle 1 Chicago gasoline fell back about 2.00 cents a gallon to 20.00/18.00 cents under April NYMEX RBOB gasoline futures while ULSD rose 9.00 cents a gallon to 25.00/22.00 cents under.
Group Three gasoline was seen a half cent a gallon higher at 6.50 cents under March futures, while Group Three ULSD was steady at 5.75/5.50 cents under the March heating oil screen.