An outage on a major refined products pipeline in the US may provide a filip to the Jones Act and Atlantic Basin clean products trades.

The Colonial Pipeline, which is actually several pipelines stretching from the US Gulf Coast to the US Northeast, reported a leak on a line that carries gasoline.

While some of the displaced gasoline will be transferred to a line carrying diesel fuel, tanker brokerage MJLF reports that the outage “has been encouraging some Jones Act inquiry to move cargoes from the US Gulf to the Atlantic Coast.”

The inquiries come at a particularly weak point for the Jones Act tanker market. US Atlantic Coast refineries have been bringing in more crude oil from overseas thanks to low prices and freight rates. Spot rates for Jones Act tankers are running about half the level seen in 2014, according to Wells Fargo.

MJLF says the cabotage movements of gasoline “are being made economical by the declining price of gasoline in (the US Gulf) and the relatively low Jones Act rates.”

At the same time, more gasoline backing up in the Gulf Coast could also incentivise traders to move cargoes on medium-range (MR) tankers to Latin America, West Africa or east coast of Canada. More diesel from the US Gulf could also move on tankers, MJLF added.

“In short, any disruption to the Colonial pipeline is beneficial to marine shipping, which tends to be the most economical means of making up lost supply,” MJLF said. “The overall impacts wil be modest unless the outage continues though.”

MR rates rise on USGC fixtures

The Baltic Exchange's assessment of time charter equivalent for cmedium-range (MR) tankers outbound from the US Gulf reached a $1,366 per day on Wednesday, after being assessed at a negative $351 per day yesterday. A negative rate assessment reflects fixtures done below operating expenses.

MJLF analyst Court Smith says the Colonial outage, along with rising gasoline inventories, have pressured US Gulf gasoline prices, creating more arbitrage opportunities for clean products. Despite strong chartering activity reducing the available supply of spot vessels, rates still remain near two-year lows.

Rates moved up as "a result of gasoline and distillate pricing in the US Gulf due to the Colonial outage," Smith said. "All the prompt ships are gone."