European gasoline cargoes diverted from NYH to LA
OREANDA-NEWS. September 21, 2016. At least two product tankers that loaded roughly 600,000 bl of gasoline in Europe are scheduled to discharge in the next few days in Los Angeles, California, where gasoline demand has risen on the back of a refinery outage in nearby Torrance.
The vessels had initially been destined for New York, but brimming gasoline stocks there prompted the vessels to re-route to another location for discharge.
As US driving season comes to an end, gasoline stocks in the US northeast hit 64.9ml bl the week ending 2 September, when the tankers were near New York, and were at 64ml bl the week ending 9 September. That's below historic highs reached this summer, but well above the September average of the previous three years of 56.7mn bl.
The Shell-operated Silver Carolyn, a medium range (MR) tanker with a roughly 300,000 bl capacity, loaded a gasoline cargo in Europe in mid-August. It visited New York Harbor on 31 August but did not discharge, and three days later changed its destination to Los Angeles. The Hellas Avatar, another MR, cast off from the Netherlands on 24 August with a New York-bound gasoline cargo but was re-routed toward the Panama Canal, and is currently off the coast of California.
Depressed freight costs in the summer, on the back of high global inventories and a tanker surplus, have improved economics for shipping oil longer distances, such as from Europe to the US west coast, which is an uncommon product tanker route.
The gasoline in the Silver Carolyn and the Hellas Avatar will meet California summer grade specifications, said a shipbroker.
The timing of the diversion away from New York and toward Los Angeles was fortuitous for the cargo owners. Even though the leak on 9 September on a section of the Colonial pipeline that feeds gasoline to the US northeast raised demand for the product in regions along the US Atlantic coast, it likely occurred too late for the vessels to be directed again as they were already at or near the Panama Canal and heading toward the Pacific. The power outage at the Torrance refinery on 17 September has boosted gasoline demand in Los Angeles, allowing the cargo-owners to capitalize on higher prices there.
"Their timing looked bad last week, but looks great this week," said a trader.
Los Angeles CARBOB prices have spiked this week because of power outages at PBF's 155,000 b/d refinery in Torrance, California. Heavy flaring continued for a third day today as it recovers from power outages and a mechanical failure. The company reported a compressor problem and unidentified mechanical breakdown on 17 September, and was then hit by a power outage that affected 58,000 customers of local power utility Southern California Edison yesterday.
CARBOB cash differentials spiked 12?/USG since Friday, as market participants see tighter supply in the region. In recent weeks, the San Francisco and Portland gasoline market have traded at a strong premium to Los Angeles, amid refiner hiccups in those regions. But that premium was starting to erode this week as market talk remained focused on Torrance.