One month ago, before the commodity trading world's attention turned to the unprecedented glut in gasoline stocks, we wrote "PADD 1 Is A Holy Mess" - Is This What Finally Drags Crude Oil Lower, in which we showed the historic excess of gasoline stocks on the US East Coast, known as the PADD 1 region. A week later, in a follow up article we explained that as a deluge of Chinese gasoline exports had flooded the world, the PADD1 glut was only getting worse, leading to a pile up of tankers in New York harbor. It got so bad, that gasoline stockpiles in PADD 1 rose to a record 72.5 million barrels in the week ended July 22.
Meanwhile, as crack spreads collapsed, concerns about both gasoline and oil demand emerged, leading to a sharp selloff in oil, and the recent bear market in WTI (at least until the subsequent OPEC-meeting driven rally). After all, the key bullish narrative for the oil long case was that with a strong summer driving season, gasoline was not going to be a production bottleneck, and yet this is precisely what happened.
However, over the past three weeks, gasoline inventories finally dipped, and as we reported this morning, commercial gasoline stocks declined by another 2.7 million barrels according to the DOE, the third consecutive drop...
... with PADD1 gasoline inventories declining by 790,000 barrels to 70.125 million barrels.
To some this seemed that the much needed inventory drawdown in gasoline had finally arrived. We thought so too, and then we read something surprising: as Bloomberg reported, "gasoline has also shifted south amid cargo diversions and deviations. A 330,000-barrel tanker usually on the Houston-to-Jacksonville, Florida, run last month moved two products cargoes to Florida from New York Harbor, according to vessel tracking data compiled by Bloomberg. Since June, at least eight foreign import cargoes originally booked to supply. New York were sent instead to the U.S. Gulf Coast and Mexican West Coast."
This in turn helped explain what happened to the excess PADD 1 gasoline: it was either in a tanker en route to a different east coast location, or had found itself in a different region entirely, such as the Gulf coast.
However, while that helped alleviate the critical PADD 1 situation where the glut has eased by about 2 million barrels in the past month, it would not prevent another geographically contained problem, namely how to resolve the countrywide gasoline glut.
We now know the answer to that as well: with the East Coast at gasoline storage capacity, and quietly transporting unwanted excess gasoline to other parts of the country, it is no longer accepting inbound cargoes.
According to a position list reported by Bloomberg, the products tanker Torm Gyda will be open for charter Aug. 21 at El Palito, Venezuela, after discharging a cargo that was diverted from N.Y. Harbor.
Torm Gyda completed loading products at Porvoo, Finland, and showed deeper draft July 30. The ship is signaling El Palito as destination today after previously signaling Skaw, Denmark; London; and New York
The vessel, whose 3 prior cargoes hauled were gasoline, blending components and gasoil, and was rerouted away from New York, was booked to BP.
And that is how the East Coast gasoline glut is being "resolved" - by sending tankers full of product to different ports, while no longer accepting inbound gasoline. Meanwhile, the price of oil rises, leading to more gasoline production, and an even greater glut.