This move did not come as a surprise because gasoline blending and arbitrage economics have been weak for most of part of this year so far. Sublease tenants are also getting these unwanted tanks at a significant price discount.   
At least three major trading oil companies have reduced their tank space in the New York Harbor significantly, allowing some smaller or opportunistic players to expand their storage tank capacities. The storage subletting activity seems to be centered at IMTT products terminal at Bayonne, N.J.   
OPIS reported in September that a combination of poor gasoline blending margins and a lack of arbitrage opportunities for the most part of the year had finally taken its toll on some major oil trading companies as players were seen optimizing their oil products storage tanks on all U.S. coastal markets.   
Trading companies are seen reducing capacities of their products storage tanks that they lease from terminal operators on the U.S. West Coast, U.S. Gulf Coast and New York Harbor in an effort to cut losses due to low tank utilization so far this year. As a result of reduced tank demand, clean products tanks have fallen significantly from a peak seen only a few years ago in 2007.   
In the Northeast, Glencore gave up 350,000 bbl of tank space at IMTT’s Bayonne terminal, prior to the expiration of the tank lease.   That tank space at IMTT was then picked up by Reliance at a significantly lower rate of about 78-80cts/bbl, sharply lower than the market rate of about $1.00-$1.20/bbl last year and a high of more than $1.60/bbl in 2007.   
“No one will pay more than 90cts/bbl for tanks in the harbor for new or sublet leases right now,” a second source said.   Glencore is also said to have sublet some tank space at Bayonne to Germany’s RWE.   Besides Glencore, RWE, a relatively small gasoline arbitrage player in the New York Harbor, also subleased some tank space at Bayonne from Cargill.   
With a lower-than-normal tank cost, RWE aims to blend gasoline in those tanks when the opportunity knocks. RWE has now more than 200,000 bbl of tank capacity at Bayonne.   Some companies, including Cargill, may have also switched some storage tanks from gasoline to distillates due to the mostly poor gasoline blending economics and stronger seasonal distillates demand.   In addition, Morgan Stanley has also subleased an unknown volume of tank space to Reliance as well as Italy’s ENI.   The handover of that tank space was approved by IMTT.   
“The demand for tanks is now less than supply. If I were a tank marketer, I’d be nervous in the service,” an arbitrage player told OPIS in September.   
“This (storage tank) is a build-and-purge business. The marginal guys are getting out,” he added.   The writings were on the wall when G.E. Warren (GEW) pulled out the gasoline blending business on the Gulf Coast late last year.   OPIS reported last December that GEW, a commercial supplier, blender and wholesale distributor of refined products in the U.S., subleased its entire 1-million-bbl clean products storage tanks space at Kinder Morgan’s Pasadena and Galena Park terminals in Houston to Lukoil.   GEW had held leases for those tanks for many years, and these were the only clean products tanks held by GEW on the Gulf Coast. GEW had six years left on the lease as of December 2010.   
Also, Musket Corporation, an Oklahoma City-based products trading and distributing company, put up late last year for subletting to third-parties an unspecified volume of its 1.6-million-bbl capacity storage tanks at Magellan’s Galena Park.