A tanker of gasoline en route to New York Harbor from Europe has been diverted to a Caribbean storage hub because a narrow window of opportunity for shipping profitably to the U.S. East Coast appears to have shut, traders said.
At least 16 tankers carrying some 600,000 tonnes of gasoline blending components were booked early in April to send fuel from Europe to the East Coast.
Since, a Long-Range 2 (LR2) vessel AMOREA, floating offshore carrying summer-grade RBOB gasoline, known as F2-grade, set sail to New York.
An LR2 going to New York was uncommon to begin with, but the recent closing of the arb, or the window, caused the vessel to be diverted to the BORCO storage hub in the Caribbean, according to Reuters vessel tracking data and three sources with knowledge of the matter.
“It’s a big deal,” one East Coast trader noted, “haven’t seen an LR2 carrying F2 go to NY in forever … at least a year, maybe more.”
Shell chartered the vessel and Noble bought the cargo, the sources said. Only about four shipments of gasoline of a similar size – about 750,000 barrels – have arrived in New York over the past year, according to Reuters shipping data.
Imports to the New York harbor tend to increase as the summer approaches because of increased demand. Last week, U.S. gasoline prices climbed to a 20-month peak, making it briefly profitable to ship products to the United States from Europe .
Since then, front-month gasoline prices have tumbled to a three-week low, and weakened against forward prices, making it more advantageous to wait and keep product in storage.
The spread between gasoline futures for delivery in May versus June fell to negative 0.44 cents a gallon on Wednesday.
F2 summer-grade gasoline differentials in the New York Harbor, the delivery point for NYMEX benchmark gasoline futures, were trading about 1.25 cents per gallon under futures.
“The futures are in contango and the cash is below futures, so if you deliver that barrel today, you are losing almost 2 cents a gallon versus delivering it in May,” said Robert Campbell, head of oil products markets at consultancy Energy Aspects.
Supplies are, however, expected to tighten as strong Latin American demand pulls barrels from Europe and the U.S. Gulf Coast, likely limiting flows into the East Coast.
In addition, Nigeria will increase quality standards for its imported gasoline from July 1, a move expected to squeeze supplies.