Tanker shortage to squeeze U.S. Northeast oil supply

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Tanker shortage to squeeze U.S. Northeast oil supply Oct 24, 2000 04:12 PM ET

Reuters

NEW YORK, Oct 24 (Reuters) - A shortage of U.S. oil tankers will cut sharply into Northeast heating oil and gasoline supplies next month and will add to upward price pressure to refined products through the winter, oil traders and brokers said on Tuesday.

The number domestic vessels used to haul petroleum products to New York Harbour and New England consumer hubs will be reduced by about a third this winter compared to last year, said a source familiar with vessel traffic.

In addition to cyclical factors such as tanker maintenance and retirement of older ships, major oil companies such as BP and Exxon Mobil are tying up a few more vessels than normal this year to haul Alaskan North Slope crude, brokers said.

The shortage of tankers is particularly acute in November and will continue through about March.

"We're going to have limited domestic vessels for November for any kind of movement north of (Cape) Hatteras (N.C.)," he said.

That may mean less heating oil on the U.S. Northeast wholesale cash trading hubs at a time when wafer-thin stocks of the winter fuel are already threatening price spikes as winter sets in, oil traders say.

Normally about 18 of the 80 U.S.-flagged ships that are allowed to haul petroleum products around the nation are available for moving refined product to the Northeast oil cash markets.

"This year, you're only going to see about a dozen in the spot market for the full 250,000- to 300,000-barrel capacity," the source said.

Despite the lack of available ships, those in the petroleum shipping trade do not expect a waiver of the Jones Act, which keeps foreign vessels from hauling crude oil and its products on domestic shipments.

Petroleum products traders on the Gulf Coast, the nation's main refining hub, as well as shipping sources say only a wartime emergency or a major cold snap in the Northeast will give Washington the political will to approve a waiver of the Jones Act.

For shippers however, the shortage of freight means oil product tankers heading for the Northeast are enjoying some of the best profit margins in 20 years.

A year ago, shipping a tanker of heating oil from the U.S. Gulf Coast to the New York Harbour made about 3.5 cents per gallon.

Currently, that same tanker would make 6.0 to 6.5 cents per gallon for the same voyage, sources said.

http://www.localbusiness.com/Story/Print/0,1197,NOCITY_469298,00.html

-- Martin Thompson (mthom1927@aol.com), October 25, 2000

Answers

A one-third reduction sounds like a very big contraction in available tankers indeed.

-- Nancy7 (nancy7@hotmail.com), October 25, 2000.

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