<article><p class="lead">New York Harbor gasoline may remain well-supplied this winter amid robust local production and shipments from the US Gulf coast, yet global supply tightness and a weak transatlantic arbitrage stemming from Russia's conflict with Ukraine may offset domestic resupply.</p><p>Local production has contributed to regional gasoline inventories and a well-offered spot market so far in December. Refinery utilization averaged 102pc during November, 16 percentage points higher than a year earlier. Refinery runs fell to 93.6pc the week ended 16 December but was still 2.1 percentage points higher than a year earlier and 26.9 percentage points higher than the same week in 2020.</p><p>Shipments from the US Gulf coast have also played a factor in prompt resupply. The Colonial pipeline has been allocated for the segment from Pasadena, Texas, to Greensboro, North Carolina, for cycles delivering through at least mid-January. The arbitrage for RBOB, CBOB, and 87 octane conventional gasoline reached its widest level since winter spec assessments started at 54¢/USG in early November amid a weakening Gulf coast market and shortages in New York Harbor, which were partially caused by seasonal refinery turnarounds and lower imports. The arbitrage averaged 18.3¢/USG so far this month, still more than enough to cover the pipeline tariff,line loss, and line space value. Shipments are likely to remain steady until at least mid-January through Colonial pipeline's allocated cycle 1, even if the arbitrage weakens.</p><p>Central Atlantic coast gasoline stocks rose by 2.8mn bl the week ended 16 December to a three-month high at 27.7mn bl, according to data from the Energy Information Administration.</p><p>Imports from Europe to New York Harbor have contributed to regional resupply this winter. As much as 4.4mn bl of gasoline is estimated to arrive from Europe during December, according to Vortexa, compared to 3.1mn bl a year earlier. Freight costs have been rising this month, however, and have weighed on the transatlantic arbitrage despite a supply overhang forming in Europe. Rates averaged $53.01/metric tonne so far this month for 37,000t clean vessels between northwest Europe and New York Harbor, up from $47.78/t in November and $22.42/t a year earlier. </p><p>A steady flow of European gasoline was directed to west Africa this month in the meantime. Russia's ongoing conflict with Ukraine created supply tightness in Europe during November, likewise hampering transatlantic movements at the time. </p><p>Butane, which serves as part of the winter RBOB blend pool, has been less costly relative to RBOB this year. The RBOB/butane spread averaged 97¢/USG in the week ended 23 December compared with 56¢/USG a year earlier.</p><p>Domestic demand has also impacted stock levels as US finished gasoline products supplied — a proxy for demand — averaged 6pc below a year earlier in November at 8.6mn b/d and 7.6pc below a year earlier at 8.4mn b/d so far this month. </p><p>New York Harbor RBOB cash prices fell to a one-year low on 8 December at $2.04/USG, the lowest since 3 December 2021. Cash prices rose to $2.37/USG by 23 December as futures rebounded. Cash differentials dropped to their weakest point since mid-April at Nymex -1.5¢/USG the week ended 23 December. The forward curve from the prompt through fifteen days out flipped from backwardation to contango as a result of the prompt weakness. The curve structure settled at -0.4¢/USG on 23 December.</p><p>Additionally, during the first week of December, the front month Nymex spread flipped from backwardation to contango, meaning prompt prices are lower than forward prices. This change in the curve structure will likely encourage adding and rolling inventories forward. The January/February Nymex spread settled at -0.79¢/USG on 23 December. The front month spread was backward at +0.28¢/USG last year in comparison.</p><p class="bylines">By Stephanie Crawford</p></article>
