NEW YORK (Reuters) - Colonial Pipeline’s Line 1, its main gasoline line, was not oversubscribed for the first time this year as robust supplies in the East Coast reduced the incentive for Gulf Coast suppliers to ship barrels on the largest fuel pipeline system in the United States.
Gasoline demand in New York Harbor has fallen because of strong supply on the East Coast, market participants said. The four-week average for motor gasoline imports into the East Coast was nearly 15 percent higher in the week to June 15 than the same time last year, according to U.S. Energy Information Administration data.
Strong imports from Europe have driven down flows from the Gulf Coast, said Matthew Smith, director of commodity research at ClipperData in Louisville, Kentucky.
Line 1, which runs from Houston to Greensboro, North Carolina, and has a capacity to carry 1.2 million barrels per day, has been allocated for each cycle so far in 2018, a source said. That means it had to ration space based on each shipper’s history of nominations on the line.
Colonial [COLPI.UL] sent a notice to shippers on June 8 that it was allocating space for Cycle 33 shipments.
The drop in demand comes at a time when the United States typically enters peak gasoline demand season as summer travel and driving gets underway.
Gulf Coast suppliers are shipping instead to the Midwest, said Robert Campbell, head of oil products research at Energy Aspects in New York.
Colonial declined to comment.
Costs for linespace, a spot market created to trade capacity on the congested pipeline, have also disincentivized shipment on Colonial, sources said.
Values on Line 1 have been lower than -1.5 cents per gallon (cpg) since June 11 and hit -1.80 cpg as of Wednesday, according to S&P Global Platts data. On June 12, values hit -2 cpg, the biggest discount since Sept. 27.
“It’s been a perpetual money loser and that hurts. And at some point people say, ‘OK, I’ve had enough,’” Campbell said.
U.S. Gulf Coast gasoline stocks rose to 83.6 million barrels in the most recent week, a seasonal record, according to EIA data.
Reporting by Stephanie Kelly; editing by Diane Craft