Houston MGO prices up on demand, not line closure

Houston marine gasoil (MGO) prices rose by 1.5pc yesterday compared with the prior trading day amid high demand, while suppliers remain unconcerned about the disruption to the Colonial pipeline.

Argus' Houston MGO delivered assessment rose further early today. Colonial, which offers the only distillates pipeline connection stretching from the US Gulf to the key New York Harbor hub said yesterday it plans to restore service by the end of the week.

MGO suppliers are not concerned by the pipeline disruption as distillate stockpiles are above year-earlier levels in the region. The weekly average for distillate inventories in the US Gulf coast in April was 51.2mn bl, 14pc higher than the 44.9mn bl April 2020 weekly average and 31pc higher compared with 31.1mn bl April 2019 weekly average, according to US Energy Information Administration (EIA) data.

MGO is comprised exclusively of distillates such as diesel and gasoil, which are mainly used as road transportation fuels.

Failure to restart pipeline shipments to New York by the end of the week could cause Gulf coast distillates to further build up and could widen the discount for MGO in Houston, Texas, to New York, as prices at both locations diverge.

But MGO traders are shrugging off this possibility for now, because — in addition to healthy MGO demand — Latin America and Europe could absorb some of US Gulf's distillates. Total US distillates exports were down to 1.0mn b/d in April, a 20pc decline from April 2020, a 30pc drop from April 2019, and the lowest April distillate export levels since 2016, according to EIA data.

By Stefka Wechsler