Adds initial price reaction.
New York Harbor gasoline prices rose modestly and trading activity thinned as the market waited to see how a fire at the east coast's largest refinery would change supplies.
An early-morning explosion and fire damaging an alkylation unit at Philadelphia Energy Solutions' (PES) 330,000 b/d refinery in Philadelphia, Pennsylvania, continued to burn late this morning, hours after firefighters brought the blaze under control. Conventional gasoline blendstock, or CBOB, could be particularly affected in the central Atlantic and western Pennsylvania markets PES supplied.
New York Harbor CBOB for Buckeye or barge lifting traded at a 13¢/USG discount to July Nymex, 2¢/USG narrower than yesterday. Bids and offers vanished for the Laurel pipeline, a 180-mile system moving product from Philadelphia to Pittsburgh. Prices for US Gulf coast gasoline, a major supplier to the Atlantic coast, were muted in initial response to the fire. Chicago gasoline, which can travel through Ohio to the Pittsburgh market, traded lower despite an anticipated higher demand from Pennsylvania.
RBOB for prompt lifting on the Buckeye pipeline traded at July Nymex +1.25/USG, higher by 0.5¢/USG than yesterday.
The Philadelphia refinery supplies the east coast's central Atlantic market around the New York Harbor as well as western Pennsylvania through the Laurel pipeline system. But a fire earlier this month on the refinery's fluid catalytic cracking (FCC) unit and a Laurel outage near Pittsburgh kept the market uncertain about the newest outage's impact.
A butane vat exploded and burned at around 4am ET, triggering a shelter-in-place advisory for the surrounding community and causing minor injuries to four workers, according to firefighters and the refiner.
PES said that three separate explosions hit the alkylation unit, which uses acid and catalyst to combine butane and olefins into a high-octane gasoline blendstock called alkylate. The broader refining complex continued to operate at a reduced rate, the company said.
A 10 June fire on a fluid catalytic cracking unit, which converts vacuum gas oil to gasoline blendstocks and other products, had already disrupted the refinery's fuel production. Union officials could not be immediately reached for comment about the accidents.
The incident could tighten the European gasoline market, where premiums to crude have been steadily narrowing in recent weeks, and draw more fuel supply from the US Gulf coast. The US Atlantic coast is the primary destination for excess European gasoline. New York Harbor drew approximately 297,000 b/d of gasoline and blendstocks from overseas suppliers — mostly Europe — so far in June, down from approximately 382,000 b/d in May. Transatlantic arbitrage movers were expected to book spot fixtures for prompt loading on a journey that takes 10 days to reach New York from Europe's ARA hub. Cargoes already at sea for other destinations could also be rerouted.
The central Atlantic region that includes Pennsylvania, New York and New Jersey drew down gasoline inventories by 880,000 bl to 32.4mn bl in the week ended 19 June, according to the Energy Information Administration. Stockpiles were 1pc lower than the five-year average for the month. The region's ultra-low sulfur diesel (ULSD) inventories were at 20.37mn bl last week, 1.8pc lower than the five-year average for June but 6.9mn bl higher than the same month last year.
The refinery processes a mostly light sweet crude diet of west African and North Atlantic crude. Imports averaged below half of its 330,000 b/d capacity in the first quarter, at roughly 150,000 b/d. Two Suezmaxes carrying west African crude are currently on route to the refinery.
PES exited bankruptcy last year under new ownership. The company blamed its financial condition on federal fuel blending laws. Bankruptcy documents showed the company had also made an ill-timed bet on the future of railed Bakken crude deliveries to the east coast.
