Category: US Refining

PADD1 Clean Tanker Demand Outlook Nov17

Clean tanker demand for the US East Coast (PADD1) is resuming its previous declines, on weak fundamentals.  Slowed by weak demographics, PADD1 gasoline demand will face tepid vehicle-miles travelled and the continued growth of electric vehicles (EVs).  Meanwhile, fuel switching to natural gas for home heating is providing a structural decline in heating oil demand, offsetting rising trucking demand for diesel.  Despite all of the angst over PADD1 refining, the region’s plants account for only 20% of clean product supply, and PADD1 is essentially a large blending centre reliant on the USG (PADD3) to meet demand.  Stable pipeline flows and rising Jones Act tanker movements will cut into imports and tanker demand.  Lower inventories and a colder winter could boost demand this season.  Download the Executive Summary of the presentation here.

Jones Act & Panama Canal Feb15

Presentation at Crude-by-Water Conference in Houston on 04 February 2015. A discussion on whether the new set of Panama Canal locks opening in 2q16 could accommodate the movement of USG crude to USWC refiners facing production declines in Alaska North Slope crude (ANS) and domestic Californian heavy crude. The higher operating and capital costs of Jones Act Alaska fleet would make the required earnings and freight costs too high to overcome typical differentials between ANS and light USG marker grades.  Download presentation here.

Citgo Refinery Sales Oct14

Market commentary in October 2014 suggested that the sale of PDVSA’s three Citgo refineries would unleash significant volumes of Venezuelan crude from the Citgo crude slates for Chinese export, and thus boost VLCC demand by as much as 4%. This is unlikely. Actual Citgo Venezuelan imports are modest, but necessary for the plants. Instead, rising tight oil production and Canadian crude imports should send Latin American volumes eastward, but the shift in Saudi pricing posture after we published this report should change the extent. If successful in pricing US tight oil and Canadian oil sands out of the market, then PADD3 seaborne imports will not fall as much and the refiners’ crude wall would be less acute.  Download report here.