Colonial Pipeline's outage has US Gulf Coast refiners looking to sell excess gasoline into Latin America, but sources said Thursday that limited demand and high freight rates may hamper that plan.
"There's a lot on offer due to Colonial issues, but only limited space to put it. This could turn ugly," a trader with a major trading house said. "Lat Am demand is already covered."
Colonial Pipeline's main gasoline line from Houston carries 1.37 million b/d -- equal to four and a half cargoes a day -- through the US Southeast into New York Harbor. It was shut September 9 on a leak -- estimated at 250,000 gallons -- in Alabama. A projected restart late this week was pushed back Thursday to sometime next week. A second line that usually carries distillates will share space with gasoline in the interim.
"All cargoes will point to the East Coast, while Gulf refiners will scramble to export if they can't get on Colonial or will cut runs," a US market source said.
"The rise in freight rates closed the trans-Atlantic arb, so Latin America should benefit," a second US market source said. He cited Mexico as likely the most opportunistic buyer.
But a second trader echoed the first trader's comments that the market may wait out the issue, especially given skyrocketing freight rates.
"There are lots of offers, but very little demand," he said. "Regular outlets are filled up."
Long-haul Medium Range tanker freight rates to the West Coast of Latin America rose $100,000 lump sum since the start of the week, or between 11-17%, depending on the disport. The USGC-Ecuador run rose 17% as S&P Global Platts assessed freight on that route at $700,000 lump sum Thursday. Farther south, freight gained 14% and 11% to reach $800,000 and $1 million for Peruvian and Chilean disports, respectively.
But those increases were tame compared with a 70% spike in freight on the USGC-Caribbean run during the same period, as heavy fixing activity during the first half of the week tightened second-decade September position lists and traders were seen scrambling for laycans prior to September 20.
Traders were heard positioning themselves mainly on USGC-Caribbean and USGC-trans-Atlantic runs to take advantage of lower gasoline values for product loading during the second decade of September. "September 18/20 -- whatever the owner wants," a broker said.
