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U.S. gasoline prices jump as PES refinery fire threatens supply

Collin Eaton and Devika Krishna Kumar

HOUSTON/NEW YORK, June 21 (Reuters) - A massive fire at the largest U.S. East Coast refinery on Friday could disrupt the region's gasoline supplies for at least two weeks, sending prices higher, traders and analysts said.

The fire shut a section of Philadelphia Energy Solutions Inc's refinery that processes 190,000 barrels per day (bpd) of crude. The accident could draw investigations that would delay a full restart of the refinery, traders and analysts said. Financial woes at PES could also make a return to normal levels of operations more difficult, they said.

The U.S. East Coast accounts for 37 percent of total U.S. demand and summer is crucial for refiners as prices rise as Americans drive more.

"If you have an extended outage at that plant and throw in rising crude prices, gasoline is going to continue to push higher," said Gene McGillian, vice president at Tradition Energy in Stamford, Connecticut. "The longer the duration of the outage, the more of an uplift there will be on gasoline prices."

U.S. gasoline futures surged as much as 4.5 percent to $1.8674 a gallon on the news, hitting their highest level since May 31. Cash prices for gasoline also rose, with New York Harbor F2 RBOB gasoline prices <RBOB-DIFF-NYH> gaining about 0.50 cents per gallon to trade at about 1 cent a gallon above benchmark futures on Friday, traders said.

The 335,000 bpd PES refinery is the largest on the U.S. East Coast, and outages there typically affect gasoline futures and wholesale prices because of its proximity to populous Northeastern U.S. markets.

Providing some cushion, U.S. East Coast gasoline inventories are largely in line with the 5-year average at about 62 million barrels, according to U.S. government data.

That will obviate an immediate need for more supply, but if the plant is largely shut for a longer period of time, it could have an extended effect on supply in the U.S. Northeast.

Prior to the fire, the average retail price of gasoline in Philadelphia was $2.93 per gallon, more than the national average of $2.67 per gallon, according to AAA.

"We'll have to see an extended period of downtime, like a month or two, then we'll see a noticeable lurch (higher) in gas prices," said Patrick DeHaan, head of petroleum analysis at GasBuddy.com.

Europe has ample gasoline supplies and could fill any gap with increased flows, said Mason Hamilton, senior petroleum markets analyst at the U.S. Energy Information Administration.

"To the extent they would need to pick up any slack, Europe's the first point of call," Hamilton said.

It could take 10 days to two weeks for larger cargoes of reformulated gasoline to arrive from Europe, traders said. The United States imports about 1 million bpd of motor gasoline, with about three-quarters of that coming to the East Coast, according to U.S. EIA data.

Additional supplies could also come via barge from the U.S. Gulf Coast, Canada or increased volumes on the Colonial Pipeline, which runs from the U.S. Gulf Coast to the Southeast and as far as New Jersey. (Reporting by Collin Eaton in Houston and Devika Krishna Kumar in New York; additional reporting by Jessica Resnick-Ault in New York Editing by Chizu Nomiyama)