Gasoline Jumps as Storm-Related Shutdowns Crimp Deliveries

Gasoline jumped more than 5 percent as fuel suppliers bought November futures contracts to cover near-term delivery agreements after the biggest Atlantic storm in history closed terminals and pipelines.

November futures surged as a Colonial Pipeline Co. product line that feeds gasoline, diesel and other fuels from Gulf Coast refineries into the New York Harbor area remained shut. Terminals around Linden, New Jersey, and Phillips 66’s Bayway refinery suffered power failures and flooding in the wake of superstorm Sandy. Power companies warned some blackouts may persist through next week.

“It’s a bit of a squeeze play because of Colonial Pipeline being down,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “Wholesalers are scrambling for supply to meet contractual obligations.”

Gasoline for November delivery rose 15.07 cents, or 5.5 percent, to $2.8795 a gallon at 9:46 a.m. on the New York Mercantile Exchange. Volume in the November contract was light, with 1,402 lots changing hands. This is the first day of floor trading since trading was suspended the first two days of the week because of the storm.

The November gasoline and heating oil contracts expire today. The more actively traded December contract rose 4.06 cents, or 1.6 percent, to $2.6561 a gallon.

Terminals Shut

“With terminals in New York Harbor shut, it’s difficult, if not impossible for sellers to make deliveries on the expiring contract,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “Longs hold the advantage, requiring the shorts to cover their position. It’s not like we have a supply shortage. We just can’t get supply through the terminals.”

Sandy came ashore as a hurricane two days ago near Atlantic City, New Jersey.

As Sandy approached land, Colonial, which operates the largest system connecting the Gulf and East coasts, began shutting delivery lines along the East Coast as terminal customers in Virginia, Maryland, New Jersey and New York halted operations. The company shut its 825,000-barrel-a-day Line 3 running from Greensboro, North Carolina, to Linden, at 7 p.m. New York time Oct. 29, a bulletin to shippers showed.

Buckeye Partners L.P. (BPL) said yesterday that many of Buckeye’s facilities in New York City, New Jersey, and Connecticut are without power and that it couldn’t estimate when all affected operations will be restarted.

Refineries Shut

In New Jersey, restarts at the 238,000-barrel-a-day Bayway refinery and Hess Corp. (HES)’s 70,000-barrel-a-day Port Reading plant are contingent on post-storm assessments, the companies said yesterday.

Philadelphia Energy Solutions’ 355,000-barrel-a-day Pennsylvania refinery is restoring operations and “came through the storm without issues,” Cherice Corley, a spokeswoman at the plant, said in an e-mail yesterday.

PBF Energy Inc.’s refineries in Delaware City, Delaware, and Paulsboro, New Jersey, are operating at reduced rates.

Heating oil for November delivery fell 0.66 cent to $3.08 a gallon on the exchange. The more actively traded December contract fell 0.38 cent to $3.0659.

The average nationwide price for regular gasoline at the pump declined 1.3 cents to $3.521 a gallon yesterday, AAA, the largest U.S. motoring organization, said today on its website. That’s the lowest level since July 31. Prices have fallen every day since Oct. 10. The pump price reached a 2012 high of $3.936 on April 4.

To contact the reporter on this story: Barbara J Powell in Dallas at bpowell4@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.

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