Viewpoint: NYH gasoline stocks to remain sufficient

New York Harbor gasoline is likely to remain well-supplied through the first quarter of 2022 amid steady shipments from the US Gulf coast and Europe.

The Colonial pipeline has been booked at capacity for the segment from Pasadena, Texas, to Greensboro, North Carolina, for cycles delivering mid-November through late-January. The arbitrage reached its widest level in 2021 at 12-13¢/USG in November amid decreasing Gulf coast cash differentials and shortages in New York Harbor. The arbitrage averaged 7-8¢/USG in December, still more than enough to cover the 5.98¢/USG shipping fee from Pasadena to the end point in Linden, New Jersey.

Prior to October, the arbitrage was shut for most of the year.

Shipments are likely to remain robust until at least late January through Colonial allocated cycle 2, even if the arbitrage narrows. Some shippers have been attempting to accumulate more Colonial line space shipping history over the past month, eyeing the possibility of the Gulf coast playing a larger role in supplying New York Harbor than earlier in 2021 year.

A greater majority of the gasoline that shipped on the Colonial during December has been making its way further north to Linden from Greensboro. Most of these batches are used to blend finished gasoline in New York Harbor. The Colonial CBOB spec can also easily supply Buckeye pipeline batches and barges in New York Harbor and can be scheduled onto Laurel pipeline in Pennsylvania.

As a result of increased shipping demand, Colonial line space values traded mostly in positive territory since mid-October and averaged slightly above flat during December. Prior to October, the line space value was negative nearly all year.

Imports from Europe into New York Harbor have accompanied domestic shipments this winter and are likely to continue into early 2022. As much as 3.2mn bl of gasoline loaded from Europe during December headed for New York, according to Vortexa. Those shipments averaged 100,000 b/d, up from an average of 70,000 b/d in December 2019 prior to the pandemic.

But volatility in the Renewable Volume Obligation (RVO) — a measurement of the cost to comply with US renewable fuel blending mandates — has added difficulty to hedging gasoline cargoes this winter, which may result in lower liquidity across transatlantic markets through the first quarter. Argus-calculated RVO spanned from 11.38¢/USG to 14.2¢/USG in December, in comparison with 1.93¢/USG to 2.7¢/USG the same time period in 2019.

Volatile RVO has complicated the import market in 2021 as it affects the profitability of arbitrages. US importers of European gasoline must pay the cost of RVO unless they already have access to biofuels and blending facilities.

Transatlantic freight rates have also been rising. Rates averaged $22.14/metric tonne in December for 37,000t clean vessels between northwest Europe and New York Harbor, the highest monthly average for 2021 and $5.24/t above November.

By Stephanie Crawford