Prompt US Atlantic Coast ULSD barges and fuel oil cargoes are working through a supply backlog stemming from Hurricane Sandy, keeping the Atlantic Coast ULSD differential at a premium to the Buckeye Pipeline and the 3%S "up-down," which is the premium of Atlantic Coast 3%S residual fuel oil over Gulf Coast 3%S, strong.
"Berths are tight," a ULSD trader said. "Adds a premium."
"There's good demand for barges," a second ULSD trader said.
Atlantic Coast ULSD for New York Harbor barges was heard done at the NYMEX December heating oil futures contract plus 20 cents/gallon, up 25 points from the Platts Friday assessment, based on a deal heard done at that level with a prompt delivery schedule.
At 10 a.m. EST (1500 GMT), the NYMEX December contract was at $3.0561/gal, up 6.93 cents from the Friday settle.
"Prompt is very tight," said an Atlantic Coast fuel oil trader.
The tightness in prompt supply could be seen when the December 3%S "up-down" widened gradually from 25 cents/b a couple of weeks ago to 75 cents/b Monday.
Supply had been held up due to terminal and refinery closures from Sandy, sources said.
"Seems that existing tanks are full," a broker said, which could create a backlog.
"There are not a lot of barges in the harbor," a second broker said, regarding barge availability in New York Harbor.
With the relatively small number of barges, the backlog would take time to work through.
The lack of available berths also exacerbated the situation, a third ULSD trader said.
"Docks were decimated by Sandy," a third broker said. "Sunoco Newark dock is gone."
"All FOB is tight because so many docks can't berth barges," a fourth trader said.
Combining robust demand and fewer available docks laid the groundwork for a stubborn premium for barges against the Buckeye Pipeline.
Since November 5, the ULSD differential for NYH barges has been above Buckeye Pipeline with an average premium of 3.625 cents/gal, reaching a peak of 6.25 cents/gal on November 15.
Prompt supplies for high-sulfur residual fuel oil on the Atlantic Coast have also been tight for the past couple of weeks, according to fuel oil sources.
Fuel oil traders also said that the "up-down" will probably narrow again closer to mid-December, but for now, while prompt supplies are tight, they expect the December up-down to remain between 50-70 cents/b.
A large supply of the high sulfur fuel oil barrels that typically come into the Atlantic Coast from Canada are going into the Gulf Coast region and into the Caribbean, said a second fuel oil second trader, so this is also causing tightness in Atlantic Coast 3%S fuel oil.
"There is one small high sulfur cargo available for the end of November, but the earliest after that is December 6-8," said a second fuel oil trader. Even then, the cargo available at the end of November is much higher in sulfur, around 5%S, according to the first fuel oil trader.
