Line space for gasoline on the nation's busiest pipeline has lost value this week as market players held onto pipeline access, driven by recent rises in Gulf Coast product, market sources said Wednesday.
Space on the 55th cycle for Colonial Pipeline gasoline-only Line 1 was heard Wednesday at a bid/offer range of minus 4 cents/gal to minus 3 cents/gal and traded at minus 3.5 cents/gal.
On Monday, space for the 54th cycle was heard at a range minus 50 to minus 25 cents/gal.
For distillates-only Line 2, line space value was heard talked Wednesday at negative 40 points, down from a bid/offer range of minus 25 points to flat earlier in the week.
The Gulf Coast spot assessment of conventional gasoline at 11.5 RVP (M3) rose four consecutive trading days ending at $2.6336/gal on Tuesday and was at a peak since Platts assessments shifted to 11.5 RVP product on September 5. M3 values early Wednesday were heard traded roughly equal with Tuesday's assessment.
"It kills the economics to ship," a US products trader said.
A higher spot value means a higher price to which any premium for line space would be added, beyond the 4.5 cent tariff to ship gasoline on Colonial. Higher spot prices discourage trade for line access, market sources said.
Another factor: The 55th cycle for gasoline lasts six days, up from the typical three to five for most Colonial cycles. Line space likely might gain value as the calendar approaches next Tuesday, when 55th cycle gasoline will be scheduled, market sources said.
"The Gulf Coast is just ripping right now," a second US products trader said. "The swing market for the Gulf is New York Harbor. There's always going to be demand in the south because it's not affected much by the weather, if there's not a hurricane."
Gulf Coast RBOB at 11.5 RVP, now at 13 cents over the NYMEX November RBOB, is not attractive to ship at that differential to the Atlantic Coast market, he said.
Negative values in the line space trade suggest that holders of Colonial capacity are willing to pay to give it away so they can maintain access to space. Allowing a line space commitment to go unfulfilled can hurt a shipper's standing with a pipeline owner.
Platts does not assess Colonial line space.
The 1.37 million b/d Line 1 carries gasoline from Pasadena, Texas, to Greensboro, North Carolina, where it links with multi-product Line 3 to the New York Harbor hub in Linden, New Jersey. The 1.16 million b/d Line 2 carries distillates from Pasadena to Greensboro.
