Colonial Pipeline rations space on gasoline line as demand recovers

(Reuters) - Colonial Pipeline Co, the largest U.S. refined products system, said on Tuesday it would go back to rationing space on its main gasoline line, as demand to haul fuel recovered amid stronger prices in the country’s populous northeast.

Gasoline prices in the East Coast are still firm after rallying to the strongest levels this year in July as inventories draw down from a record and a spate of refinery issues.

Colonial’s main gasoline line, with a capacity of about 1.2 million barrels per day, connects the refinery-hub of the Gulf Coast to the East Coast and news of increased flows to the region sent U.S. gasoline futures tumbling to a near two-week low. Cash gasoline prices in the New York harbor region also eased, traders and brokers said.

The company said it would allocate space on the pipeline segment north of Collins, Mississippi for the next five-day shipping cycle, as it typically does when nominations exceed capacity.

“This is being called based upon current nominations allowing us to maintain a 5-day shipping frequency,” a spokeswoman for Colonial Pipeline told Reuters in an email.

Demand to ship fuel on the line fell below capacity for the first time in six years in June as traders and refiners boosted exports instead of shipping to the populous U.S. northeast where stockpiles were bloated.

Inventories in the U.S. East Coast have fallen more in line with the five-year average in recent weeks, currently sitting just 3 percent higher, as demand during summer driving season has picked up. [EIA/S]

U.S. gasoline futures led the energy complex lower on Tuesday, falling as much as 2 percent to a low of $1.5956 a gallon while gasoline margins dropped as much as 5 percent - also to the lowest in nearly two weeks.

Cash gasoline prices in the New York harbor region were seen trading about 0.90 cent per gallon below benchmark futures from about 1.25 cents per gallon on Monday, traders said. Gulf Coast cash gasoline markets were largely quiet, they said.

Reporting by Devika Krishna Kumar in New York, Additional reporting by Karen Rodrigues in Bengaluru; Editing by Bernard Orr