New York Harbor is making up for slower pipeline deliveries from the US Gulf coast with higher gasoline shipments from Europe, where regional demand has waned and suppliers are looking to capture higher US margins.
Approximately 780,000 b/d of gasoline and gasoline blending components have loaded so far this month with New York as the destination, compared to 540,000 b/d last month and 550,000 b/d in March 2019, according to estimates from Vortexa. Around 70pc of these cargoes loaded from Europe.
Increased loadings are happening at a time when gasoline prices in New York Harbor are near two-year highs, driven largely by the Nymex futures contract and a seasonal switch to tighter summer specifications. CBOB prices on the Buckeye pipeline averaged $1.96/USG in the two weeks ended 19 March, up from $0.84/USG during the same week in 2020 and $1.75/USG in 2019. Prices breached $2/USG around mid-March, the highest since April 2019.
Meanwhile, fuel demand in Europe is facing further downward pressure from tightened or extended travel restrictions in France and Spain amid a new wave of Covid-19 infections.
European supplies have stepped in to fill a gap that seems unreachable for US suppliers on the Gulf coast, despite an arbitrage that has been open on paper for the past two weeks or so.
Colonial Pipeline said its main lines connection Houston, Texas, and Greensboro, North Carolina, have been operating at reduced volumes since winter storms in mid-February limited product availability on the Gulf coast. Colonial's line 3, a mixed-product pipeline that transports gasoline, distillates and jet fuel from Greensboro to Linden, New Jersey, has seen a "significant" drop in volume, resulting in large increases in transit times, according to Colonial.
A gasoline batch placed on the pipeline system at Houston, Texas, tomorrow would not reach Linden until April 7, according to the latest pipeline transit schedule. The current transit time exceeding 16 days has lengthened from fewer than 13 days in early February. In contrast, the latest gasoline cargo to leave Europe, the Star Merlin, loaded on 21 March and is expected to arrive in New York Harbor 11 days later, on 1 April, Vortexa data show.
European imports have increased despite a sustained rally in the cost of US environmental compliance. This cost of compliance, applicable to importers of finished gasoline, is measured by the Argus-calculated renewable volume obligation (RVO). The RVO over the past two weeks averaged 16.2¢/USG, including several consecutive days when it reached the highest since Argus began tracking these costs in 2013.
