The value of line space on Colonial Pipeline’s gasoline-only 1.37 million
b/d Line 1 flipped to a positive position Thursday for the first time since
August, which sources attributed to tight gasoline supplies at the pipeline’s
terminus in New York Harbor.

Platts assessed Line 1 space at 0.25 cent/gal, up 25 points day on day,
after it was heard to have traded at that level shortly before the end of the
Platts Market on Close assessment process.

One US Gulf Coast gasoline source said Line 1 space’s value mainly
depends on the spread between Gulf Coast and US Atlantic Coast gasoline
values.

Colonial, the largest US refined products pipeline, moves gasoline from
Houston to New Jersey.

Relative to the Gulf Coast, gasoline “is still very tight in New York
Harbor,” the source said, leading to the strengthening in the value of Line 1
space Thursday.

Data from the US Energy Information Administration released Wednesday
helped shed light on this dynamic. In the week that ended November 3, Gulf
Coast stocks fell some 811,000 barrels while Atlantic Coast gasoline
inventories tumbled nearly double that amount, falling almost 1.6 million
barrels week on week.

Diving even deeper, the data show Central Atlantic gasoline stocks, which
encompasses the New York Harbor area, fell to 24.02 million barrels last week,
the lowest total since April 2011.

The source said the tightness of New York Harbor’s supplies can be
primarily attributed to weaker gasoline imports, citing output issues at two
European refiners.

He said the UK’s Pembroke refinery has a gasoline-making fluid catalytic
cracking unit down while the Pernis refinery in the Netherlands is
experiencing a delayed restart.

A second source agreed with this explanation for the tighter nature of
New York Harbor supplies. “There has been a relative shortage of European
octane cargoes” arriving in the region, which has created “more demand for
supply out of the Gulf,” he said.

US Customs Bureau data corroborates the dearth of European gasoline bound
for the East Coast. The data show the Atlantic Coast did not receive a
European gasoline cargo from October 28 to at least November 6, the longest
period since S&P Global Platts started tracking the data in August 2015.

The last European cargo to arrive on the Atlantic Coast was the Stenaweco
Excellence, which deposited 280,381 barrels of conventional grade gasoline in
New Jersey from Portugal on October 27, customs data show.

All other things being equal, Line 1 space value is a decent barometer
for the economic attractiveness of the Gulf Coast-Atlantic Coast gasoline
arbitrage on the pipeline, with positive values signaling a stronger arbitrage
than negative values.

A Platts analysis shows the arbitrage was not profitable for the majority
of the days since the end of 2016, but it opened after Hurricane Harvey made
landfall. The same analysis found the arbitrage has remained open since
Harvey, with the exception of a 10-day period at the start of October.

–Seth Clare, seth.clare@spglobal.com

–Joshua Brown, joshua.brown1@spglobal.com

–Edited by Keiron Greenhalgh, keiron.greenhalgh@spglobal.com

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