US Products Outlook-Mogas to taper off before holiday

NEW YORK, June 29 (Reuters)- Gasoline trade will be lively in the beginning of the week with differentials holding firm or gaining as traders cement positions but activity is seen tapering off ahead of Independence Day holiday celebrated Friday, traders said.

"Short week, hot weather, and a holiday weekend coming up. And not much selling going on," said Tom Knight of Truman Arnold.

In the Gulf Coast, abnormally hot weather has wreaked havoc on refinery operations, causing a spate of power outages in Texas City.

Exxon Mobil's massive Baytown, TX refinery has restarted the crude unit, the hydrocracker and flexicoker which were down for unplanned work.

Harbor gasoline differentials are expected to gain in the early part of the week ahead of the Fourth of July weekend. The Independence Day holiday is traditionally the busiest period of the U.S. summer driving season.

Later in the week, however, trading is likely to slump off as the market thins ahead of the long weekend, dealers said.

The arb between Europe is open for gasoline but traders noted tepid interest in cargoes on offer.

In Chicago, supplies of gasoline will likely remain tight for cycle 1 barrels ahead of the Fourth of July holiday weekend despite the restart of a fluid catalytic cracker at BP's Whiting, Indiana refinery, dealers said.

However, differentials for July cycle 2 and cycle 3 barrels will likely weaken as the demand wanes after the holiday weekend.

Distillates in the Gulf have enjoyed interest from the contango structure of the market with many trades of ultra-low sulfur, jet and heating oil traded on roll basis last week with barrels heading for Europe and storage.

High diesel inventories have keep differentials weak in most regions with agricultural demand in the Midwest put on hold due to heavy rains, where large swathes of land are too wet to be planted.

(Reporting by Janet McGurty and Rebekah Kebede )