Thursday, April 28, 2011

Looks Like Even Higher Gasoline Prices for the East Coast

Platt's is reporting on the low gas supplies:
Declining total gasoline stocks in the critical central US Atlantic Coast region may be putting some in the US Atlantic Coast gasoline market on edge as the country moves toward the high-demand summer gasoline season.

Toward the end of last year, a slew of refinery troubles beset the Northeast. While some of those refinery troubles appear to behind the market, at least one notably has been lingering: Sunoco's 330,000 b/d Philadelphia refinery.

The latest set of problems that hit this plant was about two weeks ago, when Sunoco was forced to shut a gasoline making unit--a fluid catalytic cracker--after a fire at an associated unit. At that point, Sunoco had said the gasoline unit would return to service "shortly," which most traders took to meaning within a day or two. The next day, traders said the unit would be down for roughly a week. It is understood that the unit returned to full rates over the weekend, but that has not yet been confirmed.

A combination of those refinery troubles--new and recurring--and a slowdown in imports into the USAC recently from across the Atlantic has been steadily draining stocks in the central Atlantic. This region is especially important and closely watched, as it includes the New York harbor delivery point for the NYMEX RBOB futures contract.

Late last year, when stocks slumped steadily, traders said the decline concerned them, but that there was ample time to build inventories before the summer. And during most of February and March, the market saw stocks in the central Atlantic steadily build, surpassing 35 million barrels during early March. Over the past two years, stocks around this time of the month stood around 30-31 million barrels.

However, all that length built up over February and March has since eroded. At this point, as the market stands on the edge of summer, stocks in the central Atlantic stand at roughly 27.8 million barrels for the week ending April 22,

Phillie sounds like it's going to be a real problem. More from Platt's:
Philadelphia has become extremely tight, sending retail gasoline prices skyrocketing. In fact at this point, Philadelphia retail gasoline prices appear to have surpassed that seen for New York, typically the highest-priced for the USAC.

Based on DTN data, Philadelphia wholesale gasoline prices--also known as rack prices in the industry--have so far this month averaged 329.16 cts/gal, compared with New York's 322.9 cents/gal. A year ago at this time, Philadelphia prices averaged 225.93 cts/gal, while New York was 226.70 cts/gal...

Due to the recent issues at Sunoco Philadelphia, which is an important supplier, sellers into retail chains in that area have begun increasingly shifting supplies around in reaction. They are doing that by moving supplies from the New York market and putting them into the Buckeye Pipeline for shipment to Pennsylvania, including Philadelphia. Much of that product can then flow into the Laurel Pipeline system, which connects with Buckeye near Sinking Springs, Pa.

But there's a limit to how much of that can occur; Buckeye puts pumping restrictions on terminals in the Linden hub, so regardless of how much product may want to go to Philadelphia on Buckeye, those pumping restrictions--which are not normally an issue, but would need to be in times of high demand--are restricting just how much product can go into Philadelphia via this backdoor.

1 comment:

  1. I do believe that there are no new refinery constructions allowed in the US. This lack of refinery capacity has always been a cause of concern in gasoline prices. After Katrina, many Gulf Coast refineries that served the US South were offline causing supply shortages throughout the region.

    This is yet another place where the free market is able and willing to build new refinery capacity (or expand existing facilities) yet are not allowed.