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Macro Price Movements Take a Back Seat to East Coast Supply Issues

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Due to delays in locating and fixing the pipeline leak in Alabama, Colonial Pipeline announced yesterday that "Line 1" would not restart operations until next week (in lieu of starting sometime this weekend). "Line 2" gasoline service has begun, in limited quantities, but the product deliveries in all locations will continue to be pushed back in the coming days (weeks). 

 

NYMEX RBOB and Heating Oil spreads (i.e. front months to back months) rallied on the no-restart announcement. Market participants are beginning to worry that product supply off of the pipeline in New York Harbor, far away from the Alabama leak, will be severely limited.

NYMEX moves are taking a big back seat to the Colonial issues. October WTI rebounded a bit on Thursday, posting a small gain (up 33-cents) to settle at $43.91. Prices remain near the low end of the trading range of the last month.

 

RBOB posted a seven cent gain (stronger in the prompt month than in outer months), while Heating Oil gained three cents. Again, while these macro price changes are investment headline worthy, the oil market's main focus now, and should continue to be, on the Colonial Pipeline problem and the ongoing supply situation.

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