Colonial Distillate Line Space Strengthens On Demand, Wide Regional Spreads (Platts)

Platts – 3/4/15
By: Beth Brown

Distillates line space on the Colonial Pipeline strengthened 2 cents Tuesday on strong demand to send product to New York and a wide spread between New York Harbor and the US Gulf Coast.

Platts assessed line space on Colonial Pipeline’s Line 2 at plus 6 cents/​gal, up 2 cents from where it has been for three straight days.

Market sources said the secondary line space market was busy Tuesday as Colonial Pipeline allocated the 14th cycle for Line 2 and heating oil rolled to the 13th cycle, where ULSD and jet have been trading since the end of February.

Pipeline cycles are allocated when requests exceed capacity. The 1.16 million b/​d Line 2 carries diesel, jet fuel and heating oil from Pasadena, Texas, to Greensboro, North Carolina. At Greensboro, Line 2 links with the 885,000 b/​d multiproduct Line 3, which ends in Linden, New Jersey.

Heating oil and ULSD demand in New York Harbor has been strong due to unusually cold conditions, causing prices there to strengthen, while sources said the Gulf Coast markets have been relatively weak. This has led to the up-down, or the spread between NYH and USGC, to widen for all distillate markets.

The heating oil up-down was 12.5 cents Tuesday, the jet was 17.5 cents and ULSD was 39.65 cents. The ULSD up-down has only been wider eight times since the beginning of 2014.

It cost roughly 4.50 cents/​gal to ship fuel up the Colonial Pipeline.

The Gulf Coast high sulfur heating oil market was quiet Tuesday on the first day of a new cycle. Platts assessed heating oil with up to 2,000 ppm sulfur at NYMEX April ULSD futures contract minus 22.75 cents/​gal, up 75 points/​gal.

New York Harbor high sulfur heating oil differentials fell to minus 10.25, while ultra low sulfur heating oil differentials stayed flat at a record-high plus 27 cents/​gal.

One market source said there were no real offers in the market for low sulfur heating oil in New York, which has a maximum 500 ppm and is the specification required for many Northeastern states.