Colonial Pipeline will delay its elimination of high sulfur jet fuel and heating oil until July 2021, the company said Monday.

Colonial recently completed the bid solicitation process for the purchase of high sulfur interface and has secured commitments from shippers to purchase the product, the company said in a statement. This will allow the pipeline to continue transporting high sulfur distillate products, it said.

“We appreciate all of the feedback and suggestions from our shippers, refiners and industry groups during the past seven months following our initial proposal,” spokeswoman Malesia Dunn said in the statement. “We look forward to continuing the dialogue with our stakeholders regarding sulfur regulations and ways the industry can solve the inherent issues with handling high sulfur distillate products.”

In October 2016, Colonial announced an original target date of January 2018 to halt shipments of high sulfur jet fuel and heating oil. However, when many market players objected, the pipeline operator in December agreed to accept proposals from companies interested in purchasing the high sulfur interface.

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The “interface” is the product mix between distillate grades on the pipeline, commonly mistaken for “transmix,” which is the mix between distillates and gasoline.

“I believe a refiner or two jumped in and took the volume, but I don’t know that for sure,” a source said. “As far as their 2021 decision, there’s a good chance things will change before then.”

Colonial Monday reiterated that the continuing decline of domestic high sulfur fuel markets remains a significant issue for the shipper’s operations, thus their new target date in 2021.

Some market players expressed relief at the announcement.

“Jet is the big problem,” said a trader. “If you can’t move jet up to New York Harbor from the Gulf Coast by pipe, we are in trouble. It would be crazy — it would impact New York Harbor and all the markets along the pipeline that depend on its supply.”

The jet swaps market could see a surge in liquidity.

“We should see an increase of deferred paper activity in calendar-year 2018, now that there’s certainty in what you’re trading,” said a jet paper trader.

(This version of the story adds market reaction.)

–Daron Jones, daron.jones@spglobal.com

–Beth Brown, elizabeth.brown@spglobal.com

–Silvia Struthers, silvia.struthers@spglobal.com

–Edited by Richard Rubin, richard.rubin@spglobal.com

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