"Recessionary" Demand Forces New York Harbor To Divert Gasoline Shipments

Tyler Durden's picture

Two weeks ago, Goldman analysts were stunned when they noted that in recent weeks gasoline demand in the US has collapsed to levels that suggest not all is well with the economy. In fact, as the bank's oil expert Damien Courvalin said "to achieve the 5.9% decline suggested by the weekly data, our model requires PCE to contract 6%, in other words, a recession."

 

Goldman then quickly changed the unpleasant narrative - one which would suggest that the US economy is in far worse shape than official data represent - and provided several alternative explanations why such a "sudden collapse is unlikely" and said that "we view the larger than seasonal ytd builds in US gasoline stocks as driven by transient supply factors rather than persistent demand issues."

Perhaps, but so far those "transient" supply factors are only getting more chronic, and as supply continues to grow in anticipation of a demand bounce that refuses to materialize, leading to ever louder speculation that there is something very wrong with the US consumer...

... gasoline inventories have hit record levels, and nowhere is this more obvious than on the East Coast, where as Bloomberg writes overnight, "the biggest gasoline market in the U.S. is bursting at the seams."

As a result, just like during last year's unprecedented gasoline glut which, too, was supposed to be "transient", but has only gotten worse, traders are now lining up to export gasoline and diesel from New York Harbor, an area that normally relies on fuel imports from Europe and eastern Canada.

While at least 6 cargoes that were headed to New York from Europe in January and early February were diverted to the Caribbean or the U.S. Gulf Coast, that wasn’t enough to stem the oversupply building up in terminals along the Eastern Seaboard. Record-high inventories in the region are now pushing prices low enough to turn the typical trade flow on its head.

Gasoline supplies in PADD1, the Central Atlantic region of the East Coast, the delivery point for New York Mercantile Exchange futures contracts, rose to a record 42.3 million barrels last week. Imports of fuel to the entire East Coast averaged about 350,000 barrels a day in the first 11 months of 2016 while exports averaged 138,000 barrels, EIA data show. The chart below shows just how serious the East Coast inventory glut has become, and why New York harbor is no longer accepting gasoline shipments.

Total U.S. gasoline stocks also touched a record 259 million barrels, even as American refiners produce less fuel during the height of refinery maintenance season. U.S. crude unit outages are expected to average about 1 million barrels a day this month, and peaked last week at 1.29 million.

“We have been exporting out of the New York Harbor, but clearly not
enough, so that’s putting pressure on the products,” said Robert
Campbell, head of oil products research for Energy Aspects.

As demand fails to rebound, and as product keeps building, the only option is to either divert inbound cargoes or to export more. Both are taking place. According to Bloomberg data, at least two million barrels of clean products like gasoline and diesel are planned to be exported from New York Harbor and Philadelphia in coming days. BP Plc and Glencore Plc are among shippers sending fuels to West Africa and Europe as the U.S. East Coast saw its gasoline stockpiles break a fresh record high for the third consecutive week.

For the time being, there is virtually no hope that this unprecedented product glut will moderate because as the DOE reported last week, crude inventory also hit a new all time high.

 

While this clearly suggests that the OPEC supply cuts have done nothing to offset record inventories, and that contrary to OPEC pleas the oil market - which are now being boosted by a surge in US shale production which has found a price around $50/barrel to be quite profitable - is far from equilibrium, it also means that both oil and gasoline inventories will only continue to rise, because as refiners begin maintenance shutdowns, crude will accumulate at an even faster pace.

Which brings us to the real question: where is the demand?

While we don't have an answer, we will remind readers that exactly the same situation in which New York Harbor was quietly moving gasoline inventories to other venues as a result of an inventory glut took place last year, and then - just like now - we asked the one question that nobody seems to want answered: why is demand so low? This is what we wrote last August.

Remember that pile up of tankers in NY harbor we wrote about a month ago? Well, they're gone. But not because there is demand for their product - they simply found a different place where to store their excess inventory: gasoline has 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.

 

And just like that, the DOE gets to report a gasoline draw, even though neither supply, nor demand has changed, but was merely a cargo that disappeared from the books as it moved from point A to point B.

 

Sadly, the problem remains as there is no excess demand for gasoline at either Point A or Point B.  Which means that the bullish catalyst that sent oil surging this week on a modest decline in gasoline, will promptly reverse itself as the tanker glut returns, at either of America's numerous ports.

 

As PKVerleger summarized, “The situation is extraordinary,” and indeed it is, as industry players resort to every last trick in the book to feign incremental demand for either gasoline or oil, when none exists.

And since like in 2016, it all comes down to demand, we wonder at what point will Goldman admit that its "transient factors" explanation is meaningless, and admit that the consumer "recession" it first flagged earlier this month, is the most likely explanation.

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gatorengineer's picture

it sure looks seasonal doesnt it.

knukles's picture

It's all the electric cars we* drive in California, silly!

 

*Who's we Kimosabe?  You think I'm Ready Kilowatt?

D Nyle's picture

Its because nationwide gasoline went up 25 cents on Average. It shows how strapped Americans really are

RogerMud's picture

no mention of the insane gas taxes NJ just slapped consumers with?

gatorengineer's picture

And Penney went another some as well.  Along with another double digit percentage toll increase.  And yes people are that tapped.

Seasmoke's picture

What are you complaining about, the fat fuck dropped our sales tax from 7 to 6.875%. He Says it will more than cancel that . 23 per gallon tax increase.

/s. (Did I mention he is fat fuck?)

Rik Haines's picture

Price keeps going up here in Philly. Almost $2.50 a gallon for regular, near $3.00 a gallon for premium. 

mind reset's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://bit.ly/2jdTzrM

divingengineer's picture

Can't give the shit away at the stock exchange, but it's still  $2.87 a gallon at the pump here.

Something stinks.

Prices of cars, houses, clothes, restaurants, pretty much everything are on a rocket ride.

Yet the American consumer takes home less money every year since the 90s.

How the fuck does that work?

Offthebeach's picture

160k?

 

Who knew there were that many Spanish Welfare Industrial Complex workers looking to expand their "client" base?

JRobby's picture

Send the extra gas to Goldman's building. Pump it into the standpipes on all floors, open the caps, light.

1980XLS's picture

Virtually every MILF soccer mom has finally replaced their SUV since 2008.

They are now driving crossovers vs Expeditions/Excursions.These vehicles get on average 40% better mileage vs their predecessors.

Add in the ethanol mandate, and none of this is surprising.

 

Anybody that believes Total gallons consumption is still a big Macro indicator, is a fucking retard. Just like those been using the Baltic Dry ship index at their peril for years now.

 

Thus far, EV's have not been a significant issue.  Enron Musk and his followers are Retards as well.

Squid Viscous's picture

most soccer moms are far from MILFs...

and the switch to "crossovers" is way too gradual to explain a collapse in demand,even yr over y

all of westchester is now hot mommies driving subaru's? ... maybe i will move back there...lol

Mike in GA's picture

Reddy.  Reddy Kilowatt.  I got one somewhere that dates to the 60s.

 

GUS100CORRINA's picture

Here is a little fact that should be very unsettling.

I took a couple of minutes and put together a chart that merges gasoline storage vs pirice for the last year.

Below is the result.

Americans are paying 31% more at the pump with gasoline storage levels above last year's storage levels.

Folks: THIS COMPLETE AND UTTER BS!!!!!! More importantly, this is a 31% inflation rate!!!!

OIL STORY is similar.

AMERICANS ARE BEING "RIPPED OFF".

THESE FUTURES MARKETS ARE COMPLETELY OUT OF ORDER AND CONTROL!!

Bobbyrib's picture

No shit. I didn't need to put together a chart to see the price of oil and gasoline are being manipulated. Demand is down, supplies are building and the price of oil keeps trading in the $50-$54 range. Didn't the Tylers post an article on why the price of oil could not go below a thresshold?

You can blame this on QE. It's almost as if when you print money and give it to Wall St. they manipulate the price of what Main St needs to survive (gas, food, [in the past] heating oil) to enrich themselves. /sarcasm.

turnball the banker's picture

Bet they keep telling us how rosy and peachey the economy is.Dow 30000

Theta_Burn's picture

Is this the consequence of me eliminating the 8.0-MPG F250 brute from the fleet?

scoutshonor's picture

You know how bad news has been good news?  That must be why this article made me smile.

Joe Sichs Pach's picture

"recessionary demand" - sounds bullish, doesn't it

BigFatUglyBubble's picture

Glitches in the matrix...  expect more.

radio man's picture

If Harry Dent and Chris Martenson are correct, it's only a birth pang.

TrustbutVerify's picture

Are you getting the connection YET of why Democrats/Liberals don't want growth and prefer a flatline or recessionary economy? Its hinted at in this article. Its the dichotomy of a stronger economy requiring the increased use of fossil fuels. Now consider birth rates worldwide in oppressive and long term recessionary economies. Seeing any correlation?

sign-speak-er's picture

Many Democrats would like nothing better than a world-wide die-off, causation not terribly important.

CHoward's picture

Ahhhhhl musical tanker ships.  Catchy tune.

Bluntly Put's picture

"Which brings us to the real question: where is the demand? "

Obviously it's in storage.

hangemhigh77's picture

Damn I can boost demand because I need to cut my lawn. That should solve the problem for the banksters.

hangemhigh77's picture

I'm very concerned about the banksters keeping the price of gas high. Ahahahahaha fuck off you bastards.

hangemhigh77's picture

Expect a Sunoco refinery in philly to blow up soon. Or a Valero in Houston. Happens every year to keep the price up when demand is supposed to pick up.

Stormtrooper's picture
  • I already bought my 50 gallons of SHTF gas so I can't help.
sinbad2's picture

Keep driving in circles till you need more fuel.

OccamsCrazor's picture

its all the deportations. fewer spics driving around beat up old cars, that they couldn't afford in the first place. demand will keep dropping as we export all the illegals. 

sinbad2's picture

259 million barrels in stock at 50 bucks a barrel, is $12950,000,000, fillerup baby.

Iconoclast421's picture

Wow, same as a year ago. Where's my panic button?

SmallerGovNow2's picture

EXACTLY!  Look at the gasoline demand chart, CYCLICAL!  Happens annually this time of year...