Southeast Supply in a Chokehold for Near Future

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Daily Settlement Prices
Late on Friday afternoon, Colonial Pipeline (CPL) issued a notice that its main gasoline shipping line (Line 1 - Gulf Coast to Greensboro) had been shut for 'integrity issues' (i.e. most likely a leak) near its Moundville, Alabama pumping station.  On Sunday, CPL issued another statement saying that line would be down for several days for clean-up and repairs.  With new shipments now stopped, and in transit barrels likely delayed, gasoline supply into many Southeast locations will be delayed.  Expect tight supply conditions throughout the entire system for the near future, as marketers attempt to ascertain the impact and length of the pipeline issue.

In other news, the domestic petroleum complex ended an otherwise strong week on a negative note.  In the process it gave back most of Thursday's inventory report-driven gains as bulls shed some market length on a strong dollar and worries that the recent market surge may have been a bit overcooked.  Even with the day's deep loss (October WTI losing $1.74 to settle at $45.88), the market did settle in the black for the week (up over a dollar).  For the time being, dollar moves and OPEC speculation should keep the oil market in check (or, at least, in a narrow range).  Neither side should feel entirely optimistic of the next severe market direction.  A trading range in the neighborhood of $45 should suffice.
RBOB and Heating Oil each fell by a nickel on Friday, though like WTI, each still posted gains for the week (especially RBOB, which was up six cents week-on-week).  The large inventory draws reported in the weekly inventory summary gave gasoline that added boost, though there is probably some lingering concern that summer grade gasoline (still needed for a few days) has all but evaporated as refineries have already moved to making the winter grade variety.

091216 Weekly Pricing Graph

Published by PAPCO, Inc. (PAPCO)


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