US Cash Products-Gasoline differentials mostly steady

NEW YORK, July 16 (Reuters) - U.S. cash gasoline differentials were flat to slightly firmer as futures fell for a second day and the arb for imports from Europe was seen closed, traders said on Wednesday.

The gasoline and heating oil futures sell-off was sparked by an unexpected increase in both distillate and gasoline stocks, according to the government's inventory data for the week ending July 11.[EIA/S]

"Refineries ran at a higher pace. Gasoline was up 2.4 million barrels and demand was still weak. Some of the diesel exports slowed a bit. The only positive bulls can draw on is the half million barrel draw at Cushing. Every other component is pretty bearish," said Rob Kurzatkowski of OptionsXpress.

Refinery utilization rose to 89.5 percent while distillate stocks increased 3.2 million barrels and gasoline stocks jumped 2.4 million barrels.

Gasoline demand over the past four weeks fell by 2.1 percent from last year, according to data from the Energy Information Administration.

"Cargoes are landing with values at 5 cents under the screen and bids at 8 or 9 cents under," said one gasoline trader about imports of Eurograde which were seen diverted to Asia and the Middle East.

Values of RBOB cargoes are seen slightly higher than Eurograde but blending values are negative, traders said.

"The arb doesn't work either by a few pennies," said one RBOB blender, who said that U.S. production was ample.

In refinery news, trade sources said that several U.S. gasoline-making FCC units and reformers were seen down for work, which was also seen supportive for gasoline differentials.

Citgo was working on the FCC unit at its Corpus Christi, Tx refinery for about a week, trade sources.[ID:nN16384916]

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For a list of refinery outages, click [REF/US]

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Newly prompt cycle 41 ultra-low sulfur diesel dropped a penny from where cycle 40 scheduled to 5.75 cents over the August heating oil screen which fell 2.6 percent. The weaker differential was blamed on lack of cargo interest.

Cycle 42 conventional M2 gasoline was actively traded with values starting at 13.00 cents under the August RBOB screen before trading several times at 12.75 cents under, 13.25 cents under before moving to talk at 13.25/12.75 cents under.

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Ultra-low sulfur diesel in the Harbor moved up a penny to trade at 7 cents over lower August heating oil futures.

Heating oil was pegged at 2.25 cents, moving up about a penny against the August board.

Jet fuel was pegged at 18.50 cents over the board, a penny lower than Tuesday.

Prompt M2 gasoline traded at 15 cents under the August RBOB board for July 22, while barrels for July 22 traded at 14.50 under.

Prompt RBOB traded at 4.50 cents under the August RBOB for July 25-28 was pegged at 3.75/4.25 under.

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Ultra-low sulfur diesel in Group Three was pegged at 5.25/5.75 cents over the August heating oil board. Although levels were steady from Tuesday's levels, differentials have moved up 14 cents from the beginning of the month.

"Diesel demand remains unseasonably strong in the Group Three and basis values are definitely reflecting it," said one Group broker.

Chicago ultra-low sulfur diesel was pegged on either side of 4 cents under August futures.

Gasoline in Group Three was traded at 7.50 under the August RBOB benchmark early, up about 0.75 cent from levels late Tuesday, before moving back down, pegged at 8/7.25 cents under.

(Reporting by Janet McGurty and Rebekah Kebede)