OREANDA-NEWS. Gasoline line space on the Colonial Pipeline's main line is likely to remain negative for the foreseeable future, even as supplies in the northeast are expected to remain tight amid limited imports through the rest of the summer.

Since 27 March Colonial gasoline line space has traded below zero in the spot market — meaning shippers are paying others to take their allotted space — as domestic arbitrages from the US Gulf coast to the northeast have remained mostly unprofitable on paper.

Even when the arbitrage was workable, especially for certain blendstocks such as CBOB and premium conventional gasoline, line space value has remained between -1.75/USG and -0.5/USG over past month. On average, CBOB in the New York Harbor has carried a 6.071/USG premium over product in the US Gulf coast for the month of July. The premium needs to rise above the 5.26/USG tariff to ship product from Pasadena, Texas, to Linden, New Jersey.

Demand to ship on Colonial gasoline lines fell below capacity this July for the first time since 2012. But the lack of allocation has not impacted line space spot trading, as some shippers continued to value future nominations at a premium. Some market participants remain optimistic that allocations could return during the RVP transition period in early September, when Gulf coast refiners are likely to increase shipment on the pipeline in order to clear summer-specification inventory.

Lower volume shipments on the Colonial has not quite led to a rebalancing of supplies in the northeast, as total PADD 1 gasoline inventories fell to 62mn bl for the week ended 21 July, down by 14.25pc from year-ago levels. A lack of imports from Europe appears to have a greater impact on the market.

Imports into New York Harbor from Europe were relatively thin this summer, as European sellers looked to better arbitrages to west Africa while struggling with regional refinery disruptions. Market participants in New York Harbor are eyeing several incoming European cargoes booked before the arbitrage narrowed, but do not expect imports to rise in the coming months because of the seasonal specification change and demand drop.

A steep backwardation going into the fall is preventing suppliers from stockpiling. On 28 July, the August versus September Nymex RBOB spread was +3.03/USG, substantially stronger than the previous year.