London (Platts)--29Jan2013/713 am EST/1213 GMT

The Eurobob front-month gasoline crack swap surged to a four-month high at Monday's European close after Hess announced plans to close down its sole 70,000 b/d refinery at Port Reading, in New Jersey, a gasoline trader said Tuesday.

At Monday's European close, the February FOB Rotterdam EBOB gasoline crack swap was assessed at $13.15/barrel, up from Friday's $10.75/b, the highest recorded level since September 28, when it was assessed at $17.25/mt.

Tuesday morning, the front-month crack swap was pegged at $11.98/b, a second trade source said.

"It's all just a reaction to that news," a trader said of the rise. "The shortfall for the east coast will have to come from Europe so this summer might be interesting."

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The Port Reading refinery, which supplies refined products to the New York Harbor market -- delivery point for the NYMEX RBOB futures contract -- is scheduled to close by the end of February, the company said in a statement Monday.

Port Reading has a fluid catalytic cracking unit which produces around 35,000/mt gasoline on a daily basis, the trader said.

"It's not that large an amount but [the news] has just spooked the market given so much capacity has been lost on the US East Coast," he said.

During the last months of 2011 and the first part of 2012, more than 1 million b/d of US East Coast's regional refining capacity was either shut down or in the process of being closed, industry sources said.

This included shutdowns of Sunoco's 178,000 b/d Marcus Hook refinery in Pennsylvania and the 350,000 b/d Hovensa refinery in the US Virgin Islands, as well as possible closures of Sunoco's 330,000 b/d Philadelphia refinery and ConocoPhillips' 185,000 b/d Trainer facility, also in Pennsylvania.

This spate of refinery closures -- excacerbated by limited pipeline space and the Jones Act, the trader said -- means the US East Coast will continue to rely on European gasoline imports. The Jones Act requires goods moved between US ports to be carried by US-built ships and staffed by US crews.

"The problem is the Jones Act. The Gulf Coast is producing plenty of gasoline but you only have the colonial pipeline. It can only be shipped on US vessels that are US made, owned and staffed so the cheapest way is from Europe," he added.

The Colonial Pipeline carries 38 different grades of gasoline, seven grades of kerosene, and 16 grades of home heating oil and diesel fuel from Texas to Linden, NJ.

--Anna Ward, anna_ward@platts.com

--Orkhan Hajiyev, orkhan_hajiyev@platts.com
--Edited by James Leech, james_leech@platts.com

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