Distillate demand returned to pre-pandemic levels earlier than gasoline and jet fuel demand

MOSCOW (MRC) -- The combination of increases in both travel and economic activity in the United States has contributed to more demand for gasoline, distillate, and jet fuel, as reflected in the product supplied data of Weekly Petroleum Status Report (WPSR), according to Hydrocarbonprocessing.

Although demand has increased for all three of these products from their 2020 lows, the extent of the demand growth has differed by product.

According to the June 23 WPSR, which includes data through June 18, demand for all three fuels was lower than during the same week in 2019, the year before COVID-19 mitigation efforts began in the United States. For the week ending June 18, the four-week average demand for gasoline was 94% of the four-week average for the same week in 2019, distillate was 98%, and jet fuel was 74%. At their lowest points in 2020, gasoline demand fell to 56% of its corresponding 2019 level, distillate demand to 80%, and jet fuel demand to 31%.

We estimate product supplied by the volume of petroleum products delivered out of the primary supply chain. Although product supplied is a reasonable proxy for consumption, weekly data may show volatility due to temporary demand, trade, or inventory fluctuations. As a result, a four-week rolling average often provides a better indication of longer-term consumption trends.

Based on rolling four-week averages, US gasoline demand fell from 9.3 million barrels per day (b/d) during the week of March 13, 2020, (when President Trump declared a national emergency) to 5.3 million b/d on April 24, 2020. Beginning in March 2021, however, demand started growing again, and consumption rose above 9.0 million b/d during the week of May 21 for the first time since March 20, 2020. For the week ending June 18, gasoline product supplied averaged 9.1 million b/d, 94% of the 2019 level for the corresponding week.

Demand for US jet fuel has also increased from its 2020 lows as personal travel has increased, but it has not approached its 2019 levels as closely as gasoline and distillate have. International travel restrictions, concerns about rising COVID-19 case counts in other countries, and reduced business travel have probably contributed to the relatively slower return in jet fuel demand. In addition, the growth in jet fuel demand may be slower than gasoline and distillate fuel if travelers continue to avoid flying. For the week ending June 18, jet fuel product supplied averaged 1.3 million b/d, 74% of 2019 levels for the corresponding week.

COVID-19 did not affect distillate consumption as much as gasoline or jet fuel consumption. Distillate consumption in the United States is driven by economic activity and is more directly affected by changes in freight transport than by reduced travel or work-from-home trends. Demand for distribution of necessities, such as food and medical supplies, and increased home deliveries for goods likely contributed to relatively stable demand for distillate fuel during 2020. For the week ending June 18, distillate product supplied averaged 3.9 million b/d, 98% of 2019 levels for the corresponding week.

As MRC informed previously, Asia's cash differentials for jet fuel flipped into premiums for the first time this year in early May, partly supported by firmer deals in the physical market, while prompt-month spread for the aviation fuel stood at its narrowest contango in more than two months.

We remind that slumping fuel consumption during the pandemic is accelerating the long-term shift of refining capacity from North America and Europe to Asia, and from older, smaller refineries to modern, higher-capacity mega-refineries. The result is a wave of closures, often centering on refineries that only narrowly survived the previous closure wave in the years after the recession in 2008/09.

We also remind that PetroChina has nearly doubled the amount of Russian crude being processed at its refinery in Dalian, the company's biggest, since January 2018, as a new supply agreement had come into effect. The Dalian Petrochemical Corp, located in the northeast port city of Dalian, was expected to process 13 million tonnes, or 260,000 bpd of Russian pipeline crude in 2018, up by about 85 to 90 percent from the previous year's level. Dalian has the capacity to process about 410,000 bpd of crude. The increase follows an agreement worked out between the Russian and Chinese governments under which Russia's top oil producer Rosneft was to supply 30 million tonnes of ESPO Blend crude to PetroChina in 2018, or about 600,000 bpd. That would have represented an increase of 50 percent over 2017 volumes.

Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 744,130 tonnes in the first four month of 2021, up by 4% year on year. Shipments of all PE grades increased. At the same time, PP deliveries to the Russian market were 523,900 tonnes in January-April 2021, up by 55% year on year. Supply of homopolymer PP and PP block copolymers increased, whereas shipments of PP random copolymers decreased.
MRC

MOSCOW (MRC) -- The Environmental Protection Agency is pressuring owners of a US Virgin Islands oil refinery to get its approval for an orderly shutdown, calling into question the next steps for the process, reported Reuters.

Limetree Bay Energy refinery on St.Croix last week said it was preparing for an extended shutdown after failing to secure financing to continue a restart of the aged facility. Its plan included purging the processing units of gases, residual oil and products.

But the EPA on Thursday warned Limetree Bay not to employ a defective gas-flaring unit that could create "imminent and substantial endangerment," an EPA official said in a letter to the company. It wants the company to install air monitors and seek formal permission before gases are released.

The EPA also ordered the plant to install and operate 18 sulfur dioxide and hydrogen sulfide monitors on St. Croix which must remain if the flare is to be restarted, the EPA said. read more

The EPA gave Limetree to June 28 to respond, according to a letter posted on the agency's website.

As MRC wrote earlier, the 210,000 barrel-per-day refinery had begun restarting in February after being idle for nearly a decade. It was forced to shut in May after several malfunctions including a flare fire which resulted in a petroleum mist sprayed over nearby neighborhoods.

Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 744,130 tonnes in the first four month of 2021, up by 4% year on year. Shipments of all PE grades increased. At the same time, PP deliveries to the Russian market were 523,900 tonnes in January-April 2021, up by 55% year on year. Supply of homopolymer PP and PP block copolymers increased, whereas shipments of PP random copolymers decreased.
MRC

MOSCOW (MRC) -- Indian refining giant Reliance Industries has signed an agreement with Abu Dhabi National Oil Co (ADNOC) to build a multi-billion-dollar chemical project in Ruwais, marking the group’s first investment in a greenfield overseas project, according to Hydrocarbonprocessing.

Reliance, which operates the the world’s biggest refining complex at Jamnagar in western India, is becoming more international in its focus. Previously, it has bought stakes in some overseas explorations and manufacturing assets.

“This is a significant step in globalizing Reliance’s operations, and we are proud to partner with ADNOC in this important project for the region,” Mukesh Ambani, the chairman of Indian oil-to-telcom conglomerate, said in the statement.

Asia’s richest man Ambani last week announced the appointment of Saudi Aramco chairman Yasir Al-Rumayyan as a director in Reliance’s board and said this is the “beginning of the internationalization of Reliance”. The group hopes to formalize a deal to sell 20% stake to Aramco in its oil-to-chemical business.

In a joint statement, Reliance and ADNOC said they expected final investment decisions for the projects and awards of related engineering contracts to be taken in 2022. A source familiar with the matter said the project could cost USD2.1 billion.

The planned project at TA’ZIZ Industrial complex will have a capacity to produce 940,000 tons of chlor-alkali, 1.1 million tons of ethylene dichloride (EDC) and 360,000 tons of polyvinyl chloride (PVC) annually, the statement said.

As MRC informed earlier, in December 2019, Reliance and ADNOC signed a memorandum of understanding in 2019 to build Ethylene Dichloride facility in Ruwais.

EDC is a basic building-block for the manufacture of PVC, a polymer product in increasingly higher demand globally. PVC plays a critical role in the housing and agriculture sectors.

According to MRC's ScanPlast report, Russia's overall PVC production reached 346,100 tonnes in the first four months of 2021, down 1% year on year. All producers decreased production volumes over the reported period, with the exception of the Bashkir Soda Company.

Reliance Industries is one of the world's largest producers of polymers. Thus, the company produces among others polypropylene, polyethylene and polyvinyl chloride.
MRC

MOSCOW (MRC) -- PBF Energy is considering a USD550m project that would retrofit an idled hydrocracker to produce renewable diesel at its Chalmette refinery in Louisiana, said Ogj.

PBF Energy Inc. is considering a major investment to implement a renewable diesel project at subsidiary Chalmette Refining LLC’s 185,000-b/d dual-train coking refinery in Chalmette, St. Bernard Parish, La., outside of New Orleans.

As part of the potential project to ensure ongoing competitiveness and employment for the refinery’s current 516 employees, PBF Energy would invest USD550 million to retrofit an existing hydrocracking unit idled since 2010 with new technology to enable renewable diesel production at the site, Louisiana Economic Development (LED) and the operator said.

The project, which would support an additional 200 jobs during its execution, also would include construction of a pretreatment unit at the manufacturing site to allow Chalmette Refining to process renewable materials such as soybean oil, corn oil, and other biogenically derived fats and oils into feedstocks for the revamped unit.

The proposed unit conversion comes as part of PBF Energy’s recovery efforts from economic impacts sustained as a result of the coronavirus pandemic, as well as the company’s plan to prepare the refinery for a green energy transition, said Steven Krynski, PBF Chalmette’s refinery manager.

To secure the project, which aligns with goals of Louisiana’s Climate Initiatives Task Force initiative to pursue lower greenhouse gas emissions, the LED has offered PBF Energy incentives that include solutions of its FastStart state workforce training program, as well as access to Louisiana’s Industrial Tax Exemption Program (ITEP).

Granting of ITEP incentives, however, remain subject to final approval of the project by St. Bernard Parish local officials, which is due sometime later this summer, LED said. PBF Energy said it plans to reach final investment decision on the planned Chalmette renewables conversion following St. Bernard Parish local taxing bodies consider the project.

The Chalmette refinery—which PBF Energy acquired from ExxonMobil Corp. and Petroleos de Venezuela SA (PDVSA) in 2015—is equipped with flexibility to source and process a mix of light and heavy crudes to produce mostly gasoline, distillates, and specialty chemicals for distribution locally and abroad via connecting pipeline and maritime assets.

As per MRC, PBF Energy will shut most refining units at its Paulsboro, New Jersey, refinery, the company's chief executive said in a letter to employees that cited the impact of the coronavirus pandemic on fuel demand.

Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 744,130 tonnes in the first four month of 2021, up by 4% year on year. Shipments of all PE grades increased. At the same time, PP deliveries to the Russian market were 523,900 tonnes in January-April 2021, up by 55% year on year. Supply of homopolymer PP and PP block copolymers increased, whereas shipments of PP random copolymers decreased.
MRC

MOSCOW (MRC) - US crude oil inventory draws likely extended in the week ended June 25 against a backdrop of rising refinery demand, reported S&P Global.

Total commercial crude oil stocks are expected to have declined 4.7 million barrels to around 454.4 million barrels, analysts surveyed by S&P Global Platts said. The draw would put inventories at the lowest since March 2020 and leave them 6.3% behind the five-year average of US Energy Information Administration data, opening the widest deficit to that average since August 2008.

The draw comes as analysts expected refinery utilization to have pushed to around 92.9% of capacity in the week ended June 25, up 0.7 percentage point from the week prior and the highest since early January 2020.

Refinery margins turned higher last week, with US Gulf Coast WTI MEH cracking margins averaging USD11.86/b in the five days ended June 24 up from USD10.63/b seen the week prior.

Refinery margins were likely supported by strong refined product demand. US Transportation Security Administration data show nearly 2 million passengers per day crossed checkpoints last week, up 4% from the week prior and more than 250% above year-ago levels.

Total refinery net crude demand is expected to have averaged 16.35 million b/d in the week ended June 25, S&P Global Platts Analytics data shows, from an EIA-reported 16.11 million b/d during the week prior.

Total gasoline inventories are expected to have declined around 700,000 barrels to 239.04 million barrels, analysts said, putting them nearly 1% behind the five-year average. Notably, while overall gasoline stocks have tightened in recent weeks, inventories in high demand regions such as the US Atlantic Coast and Midwest have been trending higher.

Following five consecutive weekly builds, USAC gasoline stocks were 1.4% above average in the week ended June 18, EIA data shows, while during the same period Midwest stocks climbed for a third week to just 6% behind average, the narrowest deficit since early January.

Distillate inventories are expected to have climbed 100,000 barrels to 138 million barrels, analysts said. In contrast to gasoline inventories, USAC diesel stocks remain very tight despite steadily building since late May.

As MRC informed before, crude oil futures ticked higher in mid-morning trade in Asia June 23 after the American Petroleum Institute (API) reported a large draw in US crude inventories as the market awaited the July 1 OPEC+ meeting,

We remind that Indian refiners, anticipating a lifting of US sanctions, plan to make space for the resumption of Iranian imports by reducing spot crude oil purchases in the second half of the year. The world's third-largest oil consumer and importer halted imports from Tehran in 2019 after former US President Donald Trump withdrew from a 2015 accord and re-imposed sanctions on the OPEC producer over its disputed nuclear programme.

Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 744,130 tonnes in the first four month of 2021, up by 4% year on year. Shipments of all PE grades increased. At the same time, PP deliveries to the Russian market were 523,900 tonnes in January-April 2021, up by 55% year on year. Supply of homopolymer PP and PP block copolymers increased, whereas shipments of PP random copolymers decreased.
MRC