Tanker Shortage To Squeeze Northeast's Oil Supply

Wednesday, October 25, 2000
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.

The number of domestic vessels used to haul petroleum products to New York Harbor 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. 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.

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