Gasoline pared gains of as much as 7.7 percent after refiners came back online following Hurricane Sandy. Earlier, prices rose as fuel suppliers bought November contracts to cover near-term delivery agreements after the biggest Atlantic storm in history shut terminals and pipelines.
November futures, which expired today, settled 1.2 percent higher as two East Coast plants returned to normal and a third regained power. Prices touched a two-week high earlier as the biggest pipeline running from Gulf Coast refineries to New York Harbor remained shut. Terminals and refineries around Linden, New Jersey suffered power failures and flooding in the wake of Hurricane Sandy. Power companies warned some blackouts may persist through next week.
“The contract is expiring, the shorts covered their positions this morning and refiners in the Philly area are approaching normal,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.
Gasoline for November rose 3.3 cents, or 1.2 percent, to settle at $2.7618 a gallon on the New York Mercantile Exchange. It was the first day of pit trading this week, after the trading floor was shut because of the storm.
After surging 23 percent in the third quarter, gasoline sank 17 percent this month and was the biggest loser in the Standard & Poor’s GSCI index of 24 materials in October.
“These guys knew Thursday of last week this storm was coming,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Why didn’t they get out of their positions? There’s a lot of uncertainty about when these operations come back. These are people who decided to wait and roll the dice. This is the second month this has happened with big movement on the expiring contract.”
Prices touched $2.9375 a gallon in early trading before retreating as low as $2.7287.
“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.”
Futures pared gains after Phillips 66 said it has restored power at the 238,000-barrel-a-day Bayway, New Jersey refinery, though it did not give a timeline for startup. Public Service Enterprise Group Inc. said today that it restored power to substations serving Bayway and Hess Corp.’s 70,000-barrel-a-day Port Reading, New Jersey, refinery, and that the substations may have power later today.
PBF Energy Inc. returned its Paulsboro, New Jersey, refinery to normal rates today, according to a community hotline message. PBF reduced rates at Paulsboro and its refinery in Delaware City, Delaware, before Sandy made landfall.
Supplies may be constrained as Colonial Pipeline Co. said today it has no restart date for its 825,000-barrel-a-day Line 3 products pipeline, which runs from Greensboro, North Caroline, to Linden. It expects to restore power to the Linden terminal by Nov. 2 using portable generators.
“The big issue is significant amounts of terminals are without power and have taken flooding that prevented resupply and Colonial Line 3 is going to remain down until terminals in the Jersey area are able to receive,” Lipow said. “It’s not like we have a supply shortage. We just can’t get supply through the terminals.”
The more actively traded December contract rose 1.48 cents, or 0.6 percent, to settle at $2.6303 a gallon.
“There’s some buying in December and the back of the curve is starting to move, given how low supplies are,” said Stephen Schork, president of the Schork Group Inc., an energy advisory company in Villanova, Pennsylvania.
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.
Buckeye Partners LP said today it is starting to return six pipelines, serving Pennsylvania, Delaware and New Jersey, to service that it shut ahead of Hurricane Sandy.
Philadelphia Energy Solutions’ 355,000-barrel-a-day Pennsylvania refinery, which shut many units ahead of the storm, is restarting them. A return to normal rates is dependent on the “resumption of waterborne crude deliveries,” Cherice Corley, a spokeswoman at the plant, said in an e-mail today.
Heating oil for November delivery fell 1.84 cents, or 0.6 percent, to $3.0682 a gallon on the exchange. Prices fell 3.2 percent this month. The more actively traded December contract decline 0.74 cent to $3.0623 a gallon.
“We’re not buying heating oil right now,” Schork said.
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.