New York Harbor gasoline imports surge

Gasoline imports into New York Harbor rose to a 19-month high in March as European exporters plugged a gap left by storm-interrupted Gulf coast supplies.

Around 320,000 b/d of gasoline or gasoline blending components have arrived in New York Harbor so far this month, up from 180,000 b/d in February and 240,000 b/d in March 2020 — the first month when the drop in demand from Covid-19-related travel and work restrictions started to show up in data — according to estimates from Vortexa. March 2019 gasoline and blending component imports to the region were 250,000 b/d.

Around 63pc, or 200,000 b/d of the imports, loaded from Europe. New York Harbor imports in March are at their highest levels since August 2019, in the aftermath of a fiery explosion that eventually shutdown the region's then-largest 330,000 b/d Philadelphia Energy Solutions refinery.

These cargoes have arrived at a time when domestic pipeline supply from the Colonial pipeline is shrinking. Gulf coast refiners saw run rates drop to around 41pc last month, after a severe winter storm led to lasting disruptions across facilities in Texas and parts of Louisiana. Though refining capacity has mostly been restored by late March, the arbitrage remains unworkable into the New York Harbor market, and most shipments are taken off the Colonial pipeline before they reach Linden, New Jersey, into higher-priced markets in the southeast.

The lack of Gulf coast supplies bolstered both regional prices and Nymex futures, making arbitrage into New York Harbor particularly attractive for suppliers in Europe, who were faced with new Covid-19 lockdown measures that threatened demand there.

The arbitrage was wide enough to offset the high cost of renewable volume obligations (RVO), which applies to imports of finished gasoline, RBOB and CBOB. Argus-calculated RVO averaged 15.7¢/USG during 1-30 March, the highest level on record.

The March surge in imports also coincided with changes in testing requirements for reformulated gasoline from the US Environmental Protection Agency (EPA). The changes remove aromatics testing and could potentially allow for more imports of finished gasoline and blending components.

Slowdown expected

Imports into New York Harbor have subsequently bulked up regional supplies to the point of excess. New York Harbor gasoline traders are struggling to work down their winter-grade gasoline inventories, while the market is beginning to transition to summer-specification fuels.

In addition, while Nymex futures and regional prices have come off mid-March highs, the RVO has remained relatively high. This means the added cost of RVO is making a larger dent to arbitrage economics, and could raise more concerns for traders seeking margins on the transatlantic route.

By Chunzi Xu