Wednesday September 21, 2016
Colonial Pipeline announced successful completion of the "Line 1" bypass, and plans to begin limited operations on Wednesday. Though initial pump rates will likely be limited, and the gasoline supply situation through the Southeast will still be tight in the near term, the strong efforts by Colonial and its response team have alleviated longer term worries about gasoline.
The Environmental Protection Agency and several state governments have relaxed protocol on RVP timing (allowing earlier switch to winter grade gas) in an effort to get as much gasoline to the public as possible. Tuesday's announcement of the "Line 1" restart is a big step towards returning towards normalcy.
Tuesday's NYMEX behavior was similar to that of the Monday, in that RBOB stood out among its peers while crude oil flat-lined near the bottom of its recent range. October WTI expired on Tuesday (at $43.44, up 14-cents), and the now prompt November WTI contract didn't separate itself, either (closing at $ 44.05). Even though oil prices have stabilized in recent days, there are a few large forthcoming macro points that could have a severe impact on the flat price of oil.
The Department of Energy (DOE) inventory summary will come out on Wednesday morning, and the recent Colonial issue could possibly cause some wild stock level changes. Additionally, OPEC will hold a special meeting early next week in Algeria (with Russian and Iran pledging to attend this time). The bulls are hoping the group can agree on production reductions (note this is not a formal OPEC meeting - next one of those is in November). Any headline grabbing rhetoric coming out next week could cause some short term price moves but that will likely fade heading into October.
RBOB was down six cents (and cumulatively down 10-cents this week), and those losses essentially erased the gains from last week. If the RBOB dips are to be believed in full, the Colonial Pipeline announcement yesterday apparently relieved all worries that gasoline in the Northeast will tighten in the coming weeks. The front RBOB spread (October to November) has been on quite a wild ride of late, moving from a penny backward to over eight cents backward and, yesterday, falling back to under four cents. One of the most interesting pieces of data in today's DOE report will be the PADD I (East Coast) gasoline draw. Last week's data will show the full impact of the missing "Line 1" gasoline barrels in the South.
Colonial Pipeline will continue to publish updates as necessary on the progress of the bypass and the delivery schedule of inline product. Continue to visit here (papco.com/blog) or sign up for an email of these daily summaries, or visit the Colonial Pipeline website directly.
Published by PAPCO, Inc. (PAPCO)
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