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Colonial Pipeline shuts main Line 1 and 2 on Nicholas-related Houston power outage

Highlights

Line 1 open 'based on volume availability'

Lines 3 and 4 continue to operate

NYMEX RBOB crack spread jumps

Colonial Pipeline has resumed operations on its Line 1 refined products pipeline, while Line 2 remains down because of power outages caused by Hurricane Nicholas, the company said Sept. 14.

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"Colonial Pipeline has begun receiving product from shippers impacted by power outages in the Houston-area," Colonial said in an update on the T4 shipper bulletin. "As a result, we have resumed operations on Main Line 01 -- based on volume availability. Main Line 02 remains down, but we will resume operations once product is made available."

Lines 3 and 4 are operating normally, the company said.

Colonial Pipeline is a major supplier of refined products for the East Coast, carrying 1.5 million b/d of gasoline products from Houston to Greensboro, North Carolina, on Line 1 and 885,000 b/d of refined products on Line 2 from Greensboro, North Carolina, into New York Harbor.

US Atlantic Coast gasoline and diesel inventories are tight, which has already largely been priced into the market. However, any extended pipeline outages would be bullish for the New York-delivered NYMEX refined products.

USAC gasoline inventories have fallen 16.6 million barrels since late June to 54.1 million barrels, putting stocks at 15% below the five-year average, US Energy Information Administration data shows.

Nicholas made landfall as a Category 1 hurricane near the eastern part of the Matagorda Peninsula at about 1:30 am EDT on Sept. 14, and has since been downgraded to a tropical storm.

"Tropical storm conditions in the warning area across the upper Texas coast will diminish this afternoon as Nicholas moves farther to the northeast," the National Hurricane Center said.

According to poweroutage.us, roughly 524,000 customers in Texas were without power midday Sept. 14 because of Nicholas.

INITIAL PRICE IMPACT MINIMAL

NYMEX RBOB crack spreads briefly rallied midday Sept. 14 after Colonial Pipeline said it shut down its main gasoline and distillate line.

The front-month RBOB crack spread against ICE Brent was trading around $15.07/b at 1720 GMT, up from $14.80/b Sept. 13.

However, the front-month ULSD crack spread was trading around $16.93/b, down slightly from $17.07/b Sept. 13.

Atlantic Coast gasoline sources said that there were no supply concerns currently regarding the shutdown of the two lines.

So far no Houston-area refiners have reported problems with operations because of the tropical storm.