Some foreign-flagged vessels that could bring US Gulf Coast petroleum products to the storm-ravaged Northeast, following the recent lifting of the federal Jones Act, have failed to meet inspection standards, an analyst said, Platts reports.
Carl Larry, president of Oil Outlooks and Opinions, said issues continue to linger for refined products heading to the Northeast.
"[Many Jones Act] ships that are carrying product are already booked and the ones that not booked are nowhere near the US," said Larry. "What's left are substandard vessels and they are 'failing subject' is how a trader put it."
The US Friday temporarily lifted the Jones Act, which prevents foreign-flagged vessels from moving products between US ports. It takes about six days for a tanker to move from Houston to the New York Harbor, according to traders.
A Houston-based shipbroker said there was uncertainty surrounding substandard ships and if they will get Jones Act approval to head to the Northeast, but did note increased activity in the Gulf Coast.
"There are a good number of approved MRs in the USGC this morning," the shipbroker said. "I will keep checking but I think some of these ships open at the moment should have no problem getting approval for these voyages," he said, referring to ships that have been seen on a position list and have previously been approved by majors like BP, Totsa, ExxonMobil.
These approved ships presumably could be pressed into Jones Act-type vessels.
On the other hand, ships that have not been approved previously by many of the oil majors are deemed substandard and could likely fail to meet the Jones Act qualification, the shipbroker said.
Two New York-based shipowners said Monday that recently failed vessels could have been substandard but didn't have exact details.
"This could well be the case, but we are trying to find out more details," one shipbroker said.
Still physical traders in New York said Monday that it remained difficult to deliver product to the Northeast even if a ship was granted a Jones Act waiver.
MANY TERMINALS STILL SHUT
The US Department of Energy said Monday that 10 petroleum terminals in New York and New Jersey remain closed following Hurricane Sandy. And even at the terminals that are open, a lack of power makes loading difficult, some New York-based physical traders said.
With the lack of power, barges would have to load product directly from the ship and "then find a terminal that has a functioning truck loading rack," a Houston-based source said. "At the end of the day it has to get to a retail station and that means trucks."
The shut terminals include Citgo in Linden, New Jersey; Hess in Bayonne, Newark, and Perth Amboy, New Jersey; and Motiva in Brooklyn and Long Island, New York.
The lack of refined product in the already tightly-supplied Northeast market boosted NYMEX December RBOB futures on Monday as demand destruction was somewhat offset by terminals and refineries in the region that were only partially functioning.
The International-Matex Tank Terminal in Bayonne resumed partial service Saturday, DOE said Sunday, citing trade press reports, while Sunoco's Newark, New Jersey, and Inwood, New York, terminals were completely flooded and could be offline for weeks given the need for substantial repairs, the company said Friday.
Floodwaters were receding at Phillips 66's 238,000 b/d Bayway refinery in Linden, according to a flyover by Genscape Friday. Phillips 66 said Friday it has begun making necessary repairs at the refinery, and said it will make a decision to resume operations once assessments are complete.
Kyle Cooper, analyst at IAF Advisors, said there does not appear to be substantial damage to refineries in the Northeast that would take more than a few weeks to fix.
"Most likely things will be resolved by December delivery," Cooper said, referring to the NYMEX December RBOB futures contract, which rebounded off of recent lows and was trading around 2.2 cents higher at $2.5956/gal by 1:03 p.m. EST .
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