Gasoline futures retreated 2.3% Friday as government officials took steps to increase shipments of gasoline to the Sandy-scarred U.S. Northeast and as a key conduit for the motor fuel reopened.
December gasoline futures settled at $2.574 per gallon, down six cents on the New York Mercantile Exchange. The gasoline retreat came as U.S. crude oil futures fell 2.6% to settle at their lowest level since July 10.
John Kilduff, a trader with Again Capital, said the gasoline pullback came after the U.S. government temporarily waived the 1920 Jones Act, which prevents foreign tankers from transporting fuel from one U.S. port to another, such as from the oil-rich Gulf Coast to the Northeast.
"There was a strong reaction to that waiver because it opens up so many vessels that could service New York Harbor" and the rest of the region, Mr. Kilduff said.
In addition to the Jones Act waiver, New York Gov. Andrew Cuomo waived a tax on tankers docking in storm-damaged New York harbor to ease their arrival. He also declared that the port was now passable and tankers were arriving.
"There should be a real change" in the supply shortages, Gov. Cuomo said at a press conference in Manhattan. "People should see it quickly."
The Northeast region, especially New Jersey and parts of New York, has suffered from a terrible gasoline crunch since Hurricane Sandy hit, with numerous filling stations out of commission because of power shortages and the remaining stations overwhelmed with a glut of customers. Power industry officials have said it could take a week or more to restore power throughout the region.
But over the last 24 hours, a key link for gasoline supply reopened. Colonial Pipeline Co. said it had resumed deliveries on its pipeline that brings Gulf Coast gasoline and diesel to New Jersey.
About 700,000 barrels a day of fuel is being delivered in Linden, N.J., after being down since Monday due to power outages. From there it goes to oil terminals that can feed tanker trucks.
Also over the last 24 hours, NuStar Energy LP and Hess Corp. have resumed operations at terminals in Linden and Pennsauken, N.J., respectively, allowing wholesalers to retrieve product and transport to stations.
"You're seeing more power being restored and more terminals being reopened," said Jeff Lenard, a spokesman for the National Association of Convenience Stores. Mr. Lenard said the remaining challenges are "getting power, getting supply and being able to sell it affordably within the constraints of prices."
State restrictions bar gasoline marketers from raising prices excessively due to an emergency. In New Jersey, for example, gasoline stations can't raise prices more than 10% from the level right before a state of emergency.
Greg Priddy, an analyst at Eurasia Group, said the Colonial Pipeline resumption was especially critical in bolstering supply to the Northeast. Still, Mr. Priddy said the storm as a whole would lead to downward pressure on petroleum because of lost demand. In the aftermath, people aren't traveling and businesses haven't fully restored operations.
Front-month crude futures for December delivery settled at $84.86 per barrel, down $2.23, or 2.6%. Brent futures settled at $105.68 per barrel, down $2.49. The drop in crude prices came as the dollar strengthened after a U.S. jobs report came in better than expected. The drop in crude also reflected concerns about demand lost in the Northeast because of Hurricane Sandy.
Matt Smith, an analyst with Schneider Electric, said the retreat in oil also reflected the lack of news about restarts at two Northeastern oil refineries.
"If refineries aren't back on line, it means supply is going to build up," Mr. Smith said. "There's just a mindset that it's going to take longer than expected" to get everything back to normal.
Heating oil futures settled at $2.947 per gallon, down 8.6 cents, or 2.8%.
Copyright (c) 2012 Dow Jones & Company, Inc.
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
More from this Author
Most Popular Articles
From the Career Center
Jobs that may interest you