* Lack of power shuts many major fuel terminals
* NY Harbor closed to tankers, some waterways shut
* Logistics complicate delivery under NYMEX contracts
By Robert Campbell
NEW YORK, Nov 1 Logistical problems caused by
power failures and navigational hazards from storm Sandy
continued to roil New York Harbor on Thursday, threatening
widespread delays in fuel deliveries off the New York Mercantile
Exchange's futures contracts.
With many New York and New Jersey gasoline stations running
dry or without power, oil companies are scrambling to resupply
their networks but cannot gain access to millions of barrels of
fuel trapped in the region's terminals. A diesel fuel spill
after the storm added to the woes, keeping a key waterway shut.
Most, if not all, of the terminals approved by the NYMEX
futures exchange as delivery points for its gasoline and heating
oil contracts were closed, raising the possibility that traders
would be unable to fulfill contractual deliveries immediately
under the November futures contract, which expired on Wednesday.
Large oil tankers were also still barred from freely
entering New York Harbor, a major point of entry for the nearly
1 million barrels per day of fuel imported to the East Coast of
the United States.
The U.S. Coast Guard allowed limited movements on Thursday
by barges and other small vessels in the harbor, which straddles
the states of New York and New Jersey. Tankers are also being
permitted to berth on a case-by-case basis, but several key
waterways remained closed.
Most of the region's refineries continued to restore
operations, with oil markets focused on the recovery of Phillips
66's 238,000-bpd Bayway plant in Linden, New Jersey. The
refinery could resume operations next week at the earliest as it
deals with electrical equipment damaged by flooding and boosts
The U.S. East Coast relies on shipments of fuel from the
Gulf Coast and from overseas refineries to meet more than a
third of regional oil demand.
Navigational hazards forced the closure of three channels in
the lower part of the harbor, including the heavily used Arthur
Kill, a tank farm-lined waterway separating New York's Staten
Island and New Jersey, the U.S. Department of Energy said.
The Coast Guard had no timetable for reopening Arthur Kill,
hit by debris and a diesel spill.
Terminal operators that are approved delivery points for
NYMEX gasoline and heating oil futures contracts, including
Motiva, NuStar and Kinder Morgan,
remained shut because of power shortages or damage, making them
unable to schedule deliveries or shipments.
"We're down, we've got no power. There's no electricity in
the entire city of Bayonne and we've got no idea when we'll get
back up," said an operator at the International Matex Tank
Terminal in Bayonne, New Jersey.
Traders who did not exit their November RBOB gasoline or
heating oil futures positions before expiry on Wednesday must
begin on Nov. 1 to make arrangements to deliver or receive fuel.
Gasoline futures fluctuated wildly on Wednesday as
dealers positioned, surging more than 7 percent before fading.
Deliveries must be completed between Nov 8. and Nov. 29,
according to the regulations of the CME Group, operator
of the NYMEX.
However, with little or no terminal capacity available,
counterparties may have no choice but to declare force majeure
under the provisions of the CME's regulations and then arrange
alternative delivery times, traders say.
"The flexibility of the dates and methods for delivery
should help keep delivery on the November contract from becoming
an issue," said a products broker who requested anonymity
because of customers who are buyers and sellers on the exchange.
A CME spokesman said the group was working closely with
customers, market participants and terminals in New York Harbor
as they assess the storm's impact on their operations.
"We continue to monitor the situation and will keep market
participants updated as information becomes available," the
There are 13 approved terminals in New York and New Jersey
for the delivery of RBOB gasoline and 16 terminals where heating
oil deliveries can be made.
The U.S. Energy Information Administration said on Thursday
that only four terminals in New York, New Jersey and Connecticut
were open. None was in the harbor, three were in Connecticut and
one was in Paulsboro, New Jersey.
Local distributors were believed to be active in the market,
taking positions to ensure they would receive supplies.
"Due to the refining, port and pipeline issues in the
aftermath of Sandy, some wholesalers may be using the expiring
NYMEX gasoline contract as a way to get physical supply over the
next several weeks," said John Kilduff, partner at Again Capital
LLC in New York.
Colonial Pipeline, operator of a major artery that moves
fuel from refineries on the U.S. Gulf Coast to the northeastern
United States, said it hoped to resume limited operations on
Friday but that deliveries into the New York Harbor area would
be complicated by storm damage.