US Cash Products-Refiner strike fears, outages boost gasoline

NEW YORK, Jan 30 (Reuters) - Gasoline led U.S. oil product gains on Friday as fears of a refinery workers' strike added to worries that supply may dwindle as plants undergo maintenance or undertake economic run cuts, traders said.

A possible strike by 30,000 U.S. refinery workers threatens to shutter more than half of the nation's refining capacity, although a top union negotiator expressed optimism a deal could be reached before Sunday's deadline. [ID:nN29306850]

"Gasoline is up a lot ... it's the threat of strike, I guess," a gasoline trader in the New York Harbor said.

In the Gulf, conventional M4 gasoline gained three cents while it posted similar gains in the New York Harbor and gained about 1.25 cents in the Chicago hub, brokers said.

Gulf Coast gasoline added to its Thursday gains when it moved into positive territory for the first time since October as contract talks between refiners and workers went on.

"The market also still has a U.S. refinery strike possibility," said Tim Evans of Citi Futures Perspective.

"Working without a contract for a time is a possibility if talks are still considered productive, so we would not assume that an immediate walkout is definite in the absence of an agreement," the energy analyst added in a report on Friday.

Top refiner Valero -- which shut its Texas City, Texas, refinery during a maintenance begun this week -- told employees it would idle refineries in Memphis, Tennessee and Delaware City, Delaware if there was a strike this weekend.

NYMEX March crude was up a tad, but February gasoline and heating oil were up more than 3 percent ahead of their Friday expiry. Evans said the expiry was "adding an element of time pressure to activity in those contracts." [O/N]

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Conventional cycle 7 M4 gasoline differentials moved up sharply, adding more than 3 cents to trade at 5.25 cents over the March NYMEX RBOB screen ahead of the weekend on strike fears at some refineries that could start on Sunday.

Prompt cycle 8 88-grade heating oil added 0.75 cent to trade at 4.00 cents under the March NYMEX heating oil screen.

Prompt cycle 7 61-grade differentials gained 0.75 cent to trade at 0.70 under the March heating oil screen.

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M5 conventional was up 2.5 to 3 cents, done at 4.75 cents over March futures which were about a penny higher than February, against which M5 traded on Thursday at 3 cents over.

This represents a gain of about 2.5 to 3 cents for the grade, traders said.

M5 rates were done at 1.65 cent to 3.00 cents over March, up from 1.50 cents over.

RBOB F5 was set at 1.50 cents under the March print.

Among distillates, heating oil was a quarter cent lower with offers at the Feb merc level.

But other distillates were steady to higher. ULSD traded at 3 to 3.25 cents above March for Buckeye Pipeline barrels with similar offers later. Low sulfur diesel was flat at February plus 0.25 cent and jet fuel gained half a penny at 3.50 cents over March.

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Chicago gasoline differentials continued to climb, with barrels for February 1 trading at 3.25 cents over March RBOB futures.

On Thursday, differentials rose 5 cents by the end of the day, trading at 2 cents over the board for prompt cycle 1 barrels.

In Group Three, prompt gasoline differentials, inched up a quarter cent, pegged at 2.50 cents over the February RBOB board in a thin Friday market.

"People in the Midwest aren't buying," said one Midwest broker. But differentials have climbed despite low buying interest in sympathy to the Gulf Coast market and on talk of refinery work in the region.

Traders said Marathon is planning a turnaround at its Robinson, Illinois refinery, but were unable to confirm details on timing and units.

Ultra-low sulfur diesel in Group Three was offered at 6 cents under the February, up about half a penny from late Thursday trades. (Reporting by Haitham Haddadin, Janet McGurty, and Rebekah Kebede)