Colonial Pipeline allocates Line 2 for first time since May 2020

Colonial Pipeline has restricted shipments on its 1.16 million b/d, distillates-only Line 2 for the first time since May 2020, the company said Nov. 16.

In a notice to shippers, Colonial said for input north of Collins, Mississippi, will be frozen on shipping cycles 63 through 65 and allocated for its 66th shipping cycle for the line, which carries jet fuel, ULSD and heating oil. It follows similar restrictions a month ago for the 1.37 million b/d, gasoline-only Line 1, which was the first allocation since August 2020. The last time Line 2 was allocated was May 18, 2020, for its 31st shipping cycle.

Line 2 carries distillate products from the US Gulf Coast to Greensboro, North Carolina, before merging with Line 1 to become Line 3, which carries refined products to Linden, New Jersey.

Cycles are allocated by Colonial when nominations outweigh available space on the line. A freeze means no more shipments can be taken in, while an allocation means shipments may be pro-rated.

S&P Global Platts assessed Line 2 space at minus 10 points/gal on Nov. 15, which indicated a barely closed arbitrage. Line space value is an indirect measurement of market participant interest in scheduling barrels for a specific shipping cycle. A negative value suggests that shippers, which have take-or-pay contracts, offer their space on the line to fulfill their shipping commitments. On the contrary, a positive value shows interest to get space to ship gasoline.

Diesel flows from the US Gulf Coast to the Atlantic Coast via Colonial Pipeline have remained strong during the coronavirus pandemic, but jet fuel was historically up to a third of the movement and demand has lagged strongly until recently.