New York Harbor gasoline supplies have been squeezed by poor domestic arbitrage economics as well as costly blendstocks, elevating prices and drawing increased imports.
Gasoline flows from the US Gulf coast to New York Harbor have been limited by a closed arbitrage this month that extended through the seasonal RVP transition into winter. The RBOB arbitrage spread from the Gulf coast to New York Harbor averaged 4.53¢/USG so far this month, 1.45¢/USG below the break-even cost for shipping.
As a result of the narrow arbitrage, Colonial Pipeline's gasoline line segment from Pasadena, Texas, to Greensboro, North Carolina, fell out of allocation for deliveries for the rest of this month — meaning nominated shipping volumes fell below capacity of the line. The pipeline was booked at capacity for product delivering into New York Harbor from late September through the first week of October, but actual product flows fell below expectations given the weak arbitrage, according to sources.
Colonial pipeline gasoline line space settled at -1¢/USG today. Line space has traded consistently in negative territory since February this year. Negative line space indicates shippers are choosing to maintain their shipping history by paying others to take their nominated space on the pipeline, rather than taking the arbitrage loss by shipping barrels themselves.
In addition to limited Gulf coast supplies, New York Harbor RBOB has also been tight since September because of the higher cost of butane, a main blending component of winter RBOB.
New York Harbor butane settled at 42.42¢/USG below barge RBOB on 9 October, at 79.75¢/USG. Butane has averaged a 40.74¢/USG discount to barge RBOB so far this month, in comparison to 60.04¢/USG average over the course of Argus butane assessments last winter.
The price of naphtha — another main blending component in the New York Harbor gasoline market — has also risen recently, in part because of stronger export demand to Latin America. In addition, Colombian naphtha that often finds its way to the New York Harbor market has been diverted to other markets, including the Caribbean and within Colombia, according to shipping reports.
US Gulf coast heavy N+A naphtha prices averaged $1.04/USG so far in October, up from September's average of $0.99/USG. Argus does not assess naphtha prices in New York Harbor.
New York Harbor gasoline inventories have been on a steady decline since August. Stocks fell to 30mn bl during the first week of October, 9pc below last year's level, according to data from the Energy Information Administration (EIA).
Imports rise
But stronger prices in New York Harbor have drawn an increased volume of gasoline from Brazil loading in the coming weeks.
The vessel Hellas Revenger left Rio De Janeiro with approximately 240,000 bl of gasoline over the weekend, with an estimated arrival in New York Harbor on 27 October, according to Vortexa.
Shipping fixtures show several more Brazilian cargoes have been provisionally booked to carry as much as 1.2mn bl of clean products — most likely gasoline — to the Atlantic coast, most likely New York. These include the Glenda Melanie, the Nord Skate, the Nord Vantage and the Grand Ace9, all scheduled to load this week.
European gasoline cargo loadings to New York Harbor also remained relatively high so far this month. As much as 140,000 b/d of gasoline and blending components have loaded from Europe to New York Harbor so far in October, tracking closely to September's seven-month high of 150,000 b/d, Vortexa data show.
Prompt New York Harbor Buckeye and barge RBOB traded at November Nymex +1.6¢/USG to +1.75¢/USG today. Backwardation from the dead prompt timeframe through 31 October flattened by 1¢/USG over the last week to 1.38¢/USG today as cash differentials for deferred deliveries remained firm.
