US Products Outlook-NY Harbor to buck falling tide

NEW YORK, Oct 27 (Reuters) - In contrast to most other hubs, New York Harbor spot oil products are seen drawing support near-term from cold weather, lower supplies and regional refinery outages, traders said Monday.

As cooler temperatures move into the Northeast, heating oil cash prices held steady at the start of the week in the Harbor, demand for heating oil, the favored heating fuel of the Northeast, is seen 4 percent above normal this week, according to the National Weather Service on Monday. [ID:nN27DD]

Temperatures in northeastern states will average below normal Monday and Wednesday and are seen near to below normal Thursday, according to private forecaster Meteorlogix. This could translate into more demand for heating fuel.

However, products' price differentials in most hubs remain under a pall as recent government data showed that distillates and gasoline inventories in the United States rose in the week to Oct. 17 with demand continuing to be slow. [EIA/S]

But in the East Coast, or PADD 1, region, supplies of both distillates and gasoline were well below year ago levels.

"According to the EIA ... heating oil stocks in the East (PADD I) were one-quarter below the level from a year ago. Thus, supply is tight," Stephen Schork, editor of The Schork Report in Philadelphia, said in a report on Monday.

"But then again, unlike gasoline, refiners can actually make money refining distillate," he added.

Gasoline supply in the East Coast is also tighter than in other regions, and down year-on-year, which is helping support differentials in the hub while cash values of the motor fuel have collapsed in the Gulf Coast and parts of the Midwest.

Among Northeastern refiners planning fall turnarounds, Valero starts soon a 25-day maintenance on the 180,000-barrel per day crude unit at its Delaware City, Delaware refinery.

Sunoco said last week it has shut a gasoline-making reformer unit and a sulfur recovery unit at its 340,000 barrels per day Philadelphia refinery. Traders said the reformer was shut due to poor margins. [ID:nN22396006]

Asked if the refinery outages and low inventories likely will support values, a Harbor gasoline trader said: "I agree, and there's not that many imports either."

Values likely will be supported "for another week or two but after that, who knows," the trader noted.

Credit Suisse said in a research note U.S. refining margins were mostly down last week, adding that in markets east of the Rockies, only the Northeast saw margins rise. [ID:nN20381521]

Also helping boost price differentials recently in the Harbor, and pressuring them in the Gulf Coast, was news that Colonial Pipeline froze shipping volumes for cycle 60 on its main distillate line as nominations exceeded capacity.

Colonial, the biggest U.S. refined products pipeline, said over the weekend that it allocated shipments of distillates for Cycle 62 on its main line north of Collins, Mississippi.

Along the Gulf Coast, differentials continue to weaken in all products. The allocation and cycle freezes for distillates on the Colonial has diesels and heating oil pooling in the region, pushing differentials into negative territory, despite weaker benchmarks.