PADD 1 Refineries Escape Sandy Without Major Impact

On October 30, 2012 by TradingDesk

Damage assessments are underway as Sandy continues to churn through the northeast US. While the power losses are widespread and flooding may keep New York City on lock down for some time, it does appear that the PADD 1 refineries escaped without any major impact, and some operations are expected to be back online today.

There has been no word yet from Colonial pipeline on when they will be able to restart their northern line, and it will likely depend on how soon the terminals which were shut down are able to come back online. The irony, is that Colonial was forced to shut, not because of the storm, but because it’s full, and simply didn’t have a home for its product once NE terminals went offline. The reaction in gulf coast cash markets was severe, with most major product grades losing 2-3 cents in basis once the largest outlet for product was taken off the table.

Now that it appears the supply disruptions will be limited, the question is, how big of a demand impact will there be. Estimates range from 2-3 million barrels/day of refined product demand will be lost, nearly 20% of the total daily burn in the US. Refined products reversed sharply yesterday, and are following through with more selling today. Charts favor lower prices, and while it may be days before all the damage is known, it does appear that fundamentals will suddenly support a selloff as well.

CLICK HERE for a PDF of this morning’s charts


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