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(Reuters) - As the Northeast United States locks down in the path of Hurricane Sandy, the freakishly large tropical storm careening in from the Atlantic, the main impact is likely to be on fuel demand rather than supply.

Regional product prices initially rose on Monday, but the storm is more likely to have a bearish impact later this week.

The region is a major net consumer of refined products such as gasoline, diesel and aviation fuel and covers more than 30 percent of its demand by imports and even more by pipeline deliveries from refineries on the U.S. Gulf Coast.

Hurricane Sandy will therefore depress regional fuel demand more than supply and should be bearish for crude and product prices at the margin, provided there is no serious and sustained damage to the refineries clustered in Pennsylvania and New Jersey.

The East Coast of the United States (PADD 1) consumed almost 5.3 million barrels per day (b/d) of refined products last year, according to the Energy Information Administration (EIA), the independent statistical arm of the U.S. Department of Energy.

But local refineries supplied just 3.6 million b/d, leaving the region relying heavily on imports (513,000 b/d) and receipts from the Midwest (PADD 2) and the Gulf Coast (PADD 3) (1.6 million b/d) to satisfy the rest of demand As refineries in the path of the storm shut down or cut run rates, local product supplies are set to fall. But demand is likely to fall more, as airports close and road and rail traffic shrivels.

The biggest regional supply/demand imbalance is in jet fuel. Massive aviation hubs like New York's John F Kennedy Airport consumed 548,000 b/d of kerosene-type jet fuel in 2011. But regional refineries supply just 77,000 b/d, with the rest coming via pipelines from the Gulf Coast and small quantities imported.

The other big imbalance is in distillate fuel oils such as road diesel and No 2 home heating oil. PADD 1 refineries supplied just one-third of local demand (370,000 barrels per day) last year, with the remainder imported (162,000 b/d) or piped up from the Gulf (710,000 b/d).

The gasoline market is more nearly balanced, with local refineries producing around 2.9 million b/d compared with regional consumption of 3.1 million b/d.
There is a natural tendency to compare Sandy's impact with previous hurricanes such as Katrina and Rita. But the situations are fundamentally different. Katrina and Rita hit a region that was a massive net supplier of gasoline, diesel and jet to the rest of the country. Sandy is on course to a hit an area that is a big net consumer.

Severe damage to one or more of the region's refineries, such as Bayway in Linden, New Jersey, would obviously worsen the existing tightness in the diesel, heating oil and jet markets.

But if the refineries survive the storm with minimal damage, the net effect will be a big hit to demand as lockdowns cause consumption of transportation fuels to plunge.