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EIA erases projected supply gap for northeast products

25 Jul 2012, 9.22 pm GMT

Houston, 25 July (Argus) — New shipping capacity from the US midcontinent and Gulf coast to the northeast and fresh life for refineries there have erased a feared 420,000 b/d refined products gap in the region, federal observers said.

The Energy Information Administration (EIA) now expects a 50,000 b/d gap in northeast refined products supply and demand – almost all of it ultra-low sulfur distillates demanded by new heating oil standards in New York – to be easily handled by Gulf coast and midcontinent suppliers, according to the agency.

“The worst case scenario evaluated in EIA's report has not come to pass,” the agency said in a report published this afternoon.

Originally, EIA had forecast the 420,000 b/d shortfall in February, when 690,000 b/d of refining capacity was for sale in the northeast with no obvious buyer. Sunoco had announced plans to sell or shut down its 330,000 b/d refinery in Philadelphia, Pennsylvania, and its 175,000 b/d refinery in nearby Marcus Hook. ConocoPhillips, months ahead of spinning its downstream assets into Phillips 66, idled and planned to sell or shut down its 185,000 b/d refinery in neighboring Trainer.

The US shutdowns joined Hovensa's conversion of its 350,000 b/d St Croix refinery into a terminal, removing a former exporter of products to the east coast. The EIA suggested at the time that pipeline and waterborne infrastructure connecting refiners in the Gulf coast and midcontinent regions to east coast markets could not move enough product to make up shortfall.

Sunoco's Marcus Hook refinery appears to still be headed for closure. But the company is in the final stages of entering a joint venture with private equity firm The Carlyle Group to keep the Philadelphia refinery operating. US carrier Delta Air Lines purchased the Trainer refinery in a gambit to reduce jet fuel costs and ensure supply at its critical New York-area airports.

Clouds remain on the northeast's refined products horizon. Expansion to the massive Colonial pipeline system, which moves products from the Gulf coast to the New York Harbor, will not finish until 2013. Ultra-low sulfur diesel enjoys global demand and has seen increasing export from the Gulf coast, which means the northeast could compete with international buyers for the fuel.

But the forecast was nowhere near as dire as the winter suggested, the agency said.

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