Traders See Signs Of Squeeze Behind L.A. Gasoline Spike [View all]

Source: Reuters

By Erwin Seba

HOUSTON, Oct 5 (Reuters) - The unprecedented surge in California's wholesale gasoline market this week has many hallmarks of a classic short squeeze, traders said on Friday, evoking a once common ploy in unregulated oil markets.

With the isolated West Coast gasoline market already reduced by refinery outages and a pipeline closure that had diminished stockpiles to near their lowest in over two decades, the pump was already primed for a rise in prices, especially as refiners prepare to switch to winter fuel production.

But industry sources who operate in the close-knit, fiercely competitive market say fundamental factors alone cannot explain the 97-cent surge in the premium for prompt-delivery CARBOB gasoline this week. Even in the notoriously volatile California market the spike was unprecedented, pushing retail prices to near a record high of nearly $5 a gallon.

Multiple trade sources say West Coast refiner Tesoro was caught short, forcing it to scramble to buy additional fuel from other companies in order to meet its commitments.

Read more: http://www.reuters.com/article/2012/10/06/gasoline-squeeze-idUSL1E8L5HZA20121006?type=marketsNews