Gasoline futures continued to trade higher in the electronic session Thursday as the latest track of Hurricane Sandy looked headed straight for the heart of the East Coast refining industry.
The five East Coast refineries are located in the Philadelphia, Pa.-area, Delaware and New Jersey and are capable of refining 1.2 million barrels per day of gasoline or distillates, such as diesel and jet fuel, according to Andrew Lipow, president of Lipow Oil Associates. Of the 1.2 million barrels, about 600,000 barrels is gasoline capacity.
An East Coast hurricane could also impact oil tanker traffic, affecting crude and gasoline imports even if the hurricane does not make a direct hit. The Mid-Atlantic region, from Washington to New York consumes about 1.2 million barrels per day, and New England uses about 400,000 barrels per day. Other East Coast gasoline is supplied by refineries in Europe, Canada and the Gulf Coast.
"If it's headed toward the Linden, N.J. area, even if it affects the refineries, demand goes way down because there's no one on the road. That whole corridor from Philly to Boston would get shut down, probably for a good 36 hours," he said.
RBOB gasoline futures were trading up 1.5 percent at $2.63 per gallon in late trading Thursday. "Right now the futures market is acting like the only thing we lose is supply," he said. "We think this is a rally to be sold."
John Kilduff of Again Capital said the storm attracted more attention in the energy markets as information on its path became available Thursday. The storm's track is still uncertain, and it is expected to hit late Monday/Tuesday in the Mid-Atlantic or north. "You'll see product prices rise, which will support crude," he said. Diesel and heating oil could also be affected. "Supplies on the east coast are very tight and we're starting the heating oil season here, and that's not good," he said.
Even with the storm, Lipow expects retail gasoline prices to continue to fall, from the current national average. According to AAA, the national average was $3.599 per gallon Thursday, down from $3.62 the day earlier. He said it could be as low as $3.50 by next week and $3.43 per gallon during the week of the election, falling further after that.
East Coast Refinery Production Capacity by Barrels
PBF Delaware City 190,000
Phillips66 Linden 251,000
PBF Paulsboro 166,000
Monroe Fuels (Delta) Trainer 185,000
Sunoco Philadelphia 355,000
Source: Lipow Oil Associates
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