November 3, 2010
(Next Release on November 10, 2010)

Gasoline Supply on the East Coast

While U.S. gasoline inventories remain at relatively high levels, stocks have fallen in 5 out of the last 6 weeks, largely driven by a sharp and continuous decline on the East Coast over the same period (Figure 1). The gasoline supply situation was affected by factors on both sides of the Atlantic. Planned domestic refinery outages on the East Coast were higher than average in September and October and there was reduced availability of imports from Europe and Canada, which provide a significant share of East Coast gasoline supply.

Gasoline imports to the East Coast were affected by routine maintenance at the 300,000-barrel-per-day Irving St. John refinery in Canada, as well as strikes at refineries and ports in France that began in September and peaked during October. French refineries have the combined capacity to process up to 2 million barrels per day of crude oil, and industry estimates have put lost French production during the strikes as high as 540,000 barrels per day of distillate fuel and 300,000 barrels per day of gasoline. Typically, Europe is a major source of gasoline to the U.S. East Coast. However, some gasoline volumes from other parts of Europe were diverted to France, and that has been reflected in lower European exports to the United States during September and October.

In response to East Coast supply tightness, gasoline spot prices in New York Harbor have shown more price pressure than the U.S. Gulf Coast. Typically, New York Harbor conventional gasoline prices run 2 to 4 cents per gallon higher than Gulf Coast levels. By mid-October, however, the spread had widened to 9 to 12 cents per gallon, indicating modest, incremental price pressure of about 5 to 10 cents per gallon (Figure 2). Gasoline prices also rose more quickly than heating oil prices in the first 3 weeks of October, counter to typical seasonal patterns. Seasonal low demand, ample inventories, and adequate capacity buffered the East Coast from even sharper price effects.

      Source:   Thomson Reuters.

Relief appears to be forthcoming as East Coast refineries in both the U.S. and Canada return to normal operations following outages and the strikes in France end. Trade press is reporting that the Irving St. John refinery and the 238,000 barrel-per-day ConocoPhillips Bayway refinery in Linden, New Jersey are expected to return to normal operations in November, which should expand East Coast supply. At the same time, the opening of the oil ports of Le Havre and Fos-Lavera late last week has allowed crude oil imports to once again begin flowing to French refineries. However, with European inventories depleted, some impacts may continue to be felt on both sides of the Atlantic until production is able to rebuild stocks.

Retail Gasoline Prices Fall While Diesel Prices Remain Flat
The U.S. average retail price for a gallon of gasoline fell last week, decreasing more than a penny to $2.81 per gallon; this was $0.11 per gallon higher than the same week last year. The largest regional price decrease occurred on the Gulf Coast, where prices were two cents lower than last week. At $2.64 per gallon, the Gulf Coast has the lowest gasoline prices in the country. On the East Coast, prices fell slightly more than one cent. The Rocky Mountain region saw prices fall one cent, while prices in the Midwest fell under a penny. Gasoline prices on the West Coast were largely unchanged from a week ago but remained the highest in the country at $3.08 per gallon.

The retail diesel price was unchanged versus last week, with the national average for a gallon of diesel remaining at $3.07 per gallon, $0.26 higher than last year at this time. Prices in the Rocky Mountain region were up over a penny versus last week making it the only region to register a price change of at least one cent, either positive or negative. The East Coast, Gulf Coast, and West Coast all saw slight price decreases, while the Midwest saw a small increase. Prices on the West Coast were the highest in the country at $3.24 per gallon, while the Gulf Coast had the lowest prices at $2.98 per gallon.

Stocks of Propane Increase Again
U.S. inventories of propane grew slightly last week as total stocks were up 0.2 million barrels to end at 64.5 million barrels. Nonetheless, propane inventories remain 5.2 million barrels below the same period last year. The Gulf Coast region saw most of the build with 0.3 million barrels of new inventory, while the Midwest region added 0.1 million barrels of stocks. The East Coast region withdrew 0.2 million barrels and the Rocky Mountain/West Coast regional propane stocks were down slightly. Propylene non-fuel use inventories represented 2.9 percent of total propane inventories.

Residential Heating Fuel Prices Move Slightly Higher
Residential heating oil prices increased during the period ending November 1, 2010. The average residential heating oil price increased by half a cent last week to reach $2.99 per gallon; this was an increase of $0.26 per gallon from the same time last year. Wholesale heating oil prices decreased by less than $.01 last week to $2.32 per gallon. This is nearly $0.25 per gallon higher than last year’s price.

The average residential propane price increased, rising slightly more than $0.02 per gallon to reach approximately $2.45 per gallon. This was an increase of over $0.26 compared to the $2.18 per gallon average from the same period last year. Wholesale propane prices increased by nearly $0.02 per gallon, from $1.27 per gallon to $1.29 per gallon. This was an increase of almost $0.13 per gallon when compared to the November 2, 2009 price of $1.16 per gallon.

Text from the previous editions of This Week In Petroleum is accessible through a link at the top right-hand corner of this page.