Viewpoint: NYH gasoline to remain well-supplied

The domestic pipeline arbitrage to ship gasoline from the US Gulf coast to New York Harbor is likely to remain open through spring. The Colonial pipeline has been fully booked for the segment between Pasadena, Texas, to Greensboro, North Carolina, through mid-January. In 2019 the pipeline was allocated through cycle 9, which pumped in the Gulf coast in late February and delivered into Linden, New Jersey, in March.

The domestic arbitrage is likely to remain open until the Gulf coast refiners head into maintenance. The gasoline arbitrage on the Colonial pipeline has averaged 9.5¢/USG so far in December, compared to 8.7¢/USG last year.

The arbitrage has been supported by bearish fundamentals on the Gulf coast, where gasoline stocks have been increasing since early November and reached their highest level in four months at 83.5mn bl the first week of December, according to the US Energy Information Administration. This depressed Gulf coast gasoline differentials, which have been steadily declining since late November. Stocks were slightly higher last year at 83.8mn bl for the same week in December.

As a result of increased shipping demand, Colonial pipeline line space values have traded in positive territory since mid-October and increased to their highest point this year at +4.58¢/USG on 16 December.

Most of the gasoline that has shipped on the Colonial pipeline over the past few months made its way further north to Linden from Greensboro. The majority of these batches are used to blend finished gasoline in New York Harbor. Local stub lines in the northeast have become allocated amid these increased deliveries.

Imports from Europe into New York Harbor have supplemented domestic flows for the past few months and are likely to continue into early 2020. As much as 2mn bl of gasoline has loaded from Europe during the 1-23 December period headed for New York, according to oil analytics firm Vortexa. Those shipments average 84,000 b/d so far in December, up from an average of 62,000 b/d in December 2018.

European supplies are likely to remain robust despite higher transatlantic freight rates next year. Rates averaged $25/t so far in Decemberfor 37,000t clean vessels between northwest Europe and New York Harbor, the highest monthly average this year, and $1.85/t above last December. Yet this has not deterred shipment because of a lack of alternative outlets.

Clean freight rates are likely to continue to increase with the marine industry's switch to maximum 0.5pc sulfur fuels in January. But even with the increase, New York Harbor is likely to remain one of the highest margin outlets for European gasoline exporters.

Gasoline inventories reached a ten-week high at33.6mn bl in mid-December in New York Harbor, data from the US Energy Information Administration (EIA) show. RBOB stocks, at 20.8mn bl the second week of December, were 10pc above the five-year average for the week.

By Stephanie Crawford