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OIL FUTURES: RBOB, ULSD crack spreads rally on Colonial Pipeline outage

NYMEX RBOB crack spreads rallied midday Sept. 14 after Colonial Pipeline said it shut down its main gasoline and distillate line due to a power outage caused by Hurricane Nicholas.

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The front-month RBOB crack spread against ICE Brent was trading around $15.13/b at 1623 GMT, up from $14.80/b Sept. 13.

However, the front-month ULSD crack spread was trading around $17/b, down slightly from $17.07/b Sept. 13.

"Colonial Pipeline proactively shut down main lines 01 and 02 early this morning, September 14, 2021, due to power outage in the Houston-area following landfall of Hurricane Nicholas," said the T4 shipper bulletin on Sept. 14.

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.

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

The refined products rally was likely limited by expectations that Colonial would return the lines soon.

"I would expect will be back online today or tomorrow depending on power issues," one spot US Gulf Coast trader said.

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

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.

USAC distillate stocks have climbed 1.3 million barrels over the same period, but at 41.8 million barrels the week ending Sept. 3 were 22% below the five-year average.