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January 29, 2013 6:58 pm
US wholesale gasoline prices hit a three-month high after Hess Corporation on Monday said it will next month close a refinery at Port Reading, New Jersey, that supplies gasoline to the New York market.
Nymex February RBOB gasoline futures climbed 1.4 per cent on Tuesday to a session high of $2.9741 per gallon shortly before midday in New York, as traders factored in the imminent reduction of supply.
Gasoline futures have risen 3.5 per cent since the Hess announcement to the highest level since mid October. The rise in gasoline prices also helped to drive crude oil prices higher. ICE March Brent rose to an intraday peak of $114.49 a barrel, the highest in three months. Nymex March WTI rose to $97.82 a barrel.
“The Hess refinery closure, and particularly the short notice, has taken the market by surprise,” said Gareth Lewis-Davies, a commodity strategist at BNP Paribas.
The price of European gasoline, which is not traded on exchange, also climbed according to market participants, in anticipation of European refiners meeting some of the shorfall in demand in the north-east region of the US.
The closure of the Hess Port Reading refinery is the latest in a string of big oil company announcements of plans to sell or close their refineries in the US East coast. Last year, Delta Air Lines purchased the 185,000 b/d Trainer refinery outside Philadelphia from Phillips 66, the refining business spun off from ConocoPhillips, as it sought to hedge its rising jet fuel costs.
Hess has also shut down a big refining centre in the Caribbean, further straining gasoline supplies to the US.
Although Hess’s Port Reading refinery produces only about 50,000 barrels a day of gasoline, it is critical for the supply of the New York area and thus has an outsize impact on the energy futures market of the city. The shortfall in gasoline in the New York area is not expected to be met from mid-western refineries, because pipelines flowing from the midwest to the New York area are running at capacity.
Gasoline, or products for blending gasoline, could also be shipped to the New York region from refineries on the US Gulf Coast, but imports from Europe may be cheaper, analysts said.
Shipments of crude and oil products within the US must be made by US-owned, crewed and flagged ships, increasing transport costs. European refineries produce more gasoline than is consumed on the continent, in part because demand in Europe has shifted towards diesel.
The traditional simple measure of gasoline refining margins, known as the RBOB crack spread, has climbed $27 from $25 a barrel since the Hess announcement on Monday.
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