MORE OIL SUPPLY RATIONING

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2000-02-03 11:07:37 EST ***MORE ALLOCATIONS ANNOUNCED Allocation and outages of many distillate products are commonplace in the East, South, and Gulf. Several more companies have informed customers of allocations. In Texas, Koch has expanded its restrictions on liftings at some terminals. Earlier in the month, Koch told customers they would be allocated in San Antonio, Forth Worth, and Corpus Christi. That allocation, which applies to low-sulfur diesel, has been expanded to Koch terminals in Euless, Waco, and Austin, Texas. Koch says it will offer a daily allocated amount and it will be sold on a "first come, first served basis." After the allocation is gone, customers will be shut off until the next day. In other words, the restrictions will be renewed daily at midnight until further notice. In Virginia, Parker Oil has confirmed it will implement an allocation on kerosene, beginning February 5 and running weekly through next week. Kerosene will be allocated by individual contract customer based on each customer's February 2000 kerosene contract divided by four. This will result in a weekly allocation ending February 11, 2000. At that time Parker will review their supply situation. These two allocations are a small sampling of the trouble suppliers are having meeting demand. Spot prices for heating oil, kerosene, and diesel fuel have skyrocketed in New York. Some of the replacement barrels coming from offshore are not up to specifications, so supply problems are complicated. Sufficient quantities have not been shipped out of the Gulf Coast, because of the heavy market backwardation and fear that those buying and shipping will get caught in a market that suddenly drops in value. Unfortunately, the market has refused to drop in value. www.opisalerts.com

-- (cashtradr@aol.com), February 03, 2000

Answers

I am a typical everyday consumer and am certainly not an oil industry insider. I am wondering if someone could spell out in laymans terms, what and where in the oil food chain these problems are and the ramifications for Joe Q. public. Thanks

-- Randy (RTSMIT@aol.com), February 03, 2000.

Cashtradr: Your web link doesn't work.... Anyone able to varify this story?

-- Thomas (tdtime@hotmai.com), February 03, 2000.

thomas, I have the same information -- the OPIS alert -- in my email now, and I posted the same on downstreamer's forum.

OPIS alerts are emailed to (mainly) oil firms who are interested in local pricing of products as well as crude.

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That said, cashtrader used the R word (rationing) for the first time. That's what it is folks; diesel, oil, kerosene, and propane are now being rationed. The supplier simply tells the customers to back up so many tankers and that's as much as they get for the day.

The next step is one we've already seen in the NE -- the distributor tells the end customer he can only have so many gallons.

They call it allocation. I call it rationing.

-- rocky (rknolls@no.spam), February 03, 2000.


Sorry about that address. Duh. It's http://www.opisnet.com

-- (cashtradr@aol.com), February 03, 2000.

Rationing will have to wind its way, like a snake, from the bulk distributors down to the retail pumps eventually. OPIS thought we'd see that happen with diesel by the end of this week or beginning of next week. I have no idea if it's happening or not on any small scale. I do know that in New England we are seeing extremely expensive diesel at the pump ($2.10 last weekend) and OPIS is saying that large depots around Boston are drying up. That ain't encouraging news, folks.

So far it's mostly distillates (home heating, diesel, kerosene) but Argus expects that it will move on to gasoline when spring arrives (and we drive more, apparently.)

The one wild card is that at some point the herd is going to spook and begin stockpiling more five gallon cans. It did make an impact before rollover as I even asked gas attentdants. A lot of consuming went on. That could and will happen again if we see prices rise much more or some rationing announced. This is called the domino effect, no?

-- paul leblanc (bronyaur@gis.net), February 03, 2000.



Yeah, OK, there's rationing and super-tight supplies in the NE. But the WSJ thread below would have us believe that y2k-induced bottlenecks are not the problem, just speculating and wanting to avaoid the costs of hedging. (Of course, they don't attempt to inform us on WHY hedging is now necessary in the first place...) My point is, do you oil watchers out there see this phenomena increasing and going nationwide or not, and do you think it'll be long term? Anyone care to speculate?

-- Ben Corson (bcorson@dmi.net), February 03, 2000.

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