U.S. East Coast Getting More Distillates to Add to Ample Supply

  • Two diesel cargoes diverted to New York Harbor this week
  • U.S. premiums surged after Colonial spill disrupted shipments

Two diesel cargoes originally bound for Europe are changing course for New York after a pipeline outage slowed shipments to the region and prices surged.

Nearly 1.5 million barrels of distillates produced in India have been diverted to New York Harbor from Europe, according to Bloomberg vessel-tracking data and people familiar with the shipments who asked not to be identified. The diversions are coming even as East Coast stockpiles of middle distillates such as jet fuel and ultra low sulfur diesel are at the highest seasonal level since 2010.

"The westbound route, especially for diesel, is looking more and more viable," said Damian Kennaby, an IHS research director in London.

Deliveries into New York were disrupted starting Sept. 9, when a spill in Alabama forced the largest U.S. gasoline pipeline to shut down. As Colonial Pipeline used its main diesel line to ship gasoline beginning Sept. 13, deliveries of diesel to New York were displaced for about a week while a bypass was constructed. Colonial hasn’t said how much less diesel was shipped.

Last week’s jump in East Coast diesel prices may have attracted the additional cargoes, said Ehsan Ul-Haq, senior analyst at KBC Advanced Technologies. He said he expects the incentive to be short-lived.

"Problems with the Colonial Pipeline might have driven these flows of diesel from Europe to the U.S., but total distillate stocks on the East Coast are around 7 million barrels higher than levels a year ago,” he said. “Refinery utilization in the region is also higher than a year prior.”

Storage Levels

East Coast distillate inventories have declined for two weeks to 66.1 million barrels after reaching a six-year high of 66.6 million the week of Sept. 9, government data show. The five-year average is about 49 million. Inventories typically drop during autumn months in the U.S. as demand for heating fuel rises with cooler weather.

Stockpiles in the storage hub of Amsterdam-Rotterdam-Antwerp are seasonally stronger than the five-year average and 445,000 tons below a year earlier, PJK International data show.

There are also signs that more of northwest Europe’s refined fuel is flowing to the Mediterranean. Traders have booked tankers to haul 1.2 million metric tons of petroleum products on the trade route so far in September, the most since October, according to lists of charters compiled by Bloomberg. The data mostly don’t specify cargo types.

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