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The United States continues trend toward exporting more gasoline than it imports


Despite record high gasoline consumption, the United States is on pace to export more gasoline than it imports for the second year in a row. Changes in regional markets, increased demand for exports, and high refinery runs are once again leading to the United States to be a net exporter in 2017.


In 2016, the United States became a net exporter of gasoline for the first time on an annual basis with net gasoline exports of 56,000 barrels per day (b/d). Through September 2017 (the most recently available monthly data), the United States averaged net gasoline exports of 55,000 b/d. The shift toward net exports of gasoline on an annual basis has been a long-running trend.


U.S. gasoline imports and exports are highly seasonal. The United States has typically been a net importer of gasoline in spring and summer months, when domestic consumption increases, and a net exporter in winter months, when demand is lower. However, for every month between April and August 2017, the United States set either record low net imports or record high net exports (Figure 1). Almost year-round net gasoline exports is a major change for U.S. gasoline markets, which is the result of one long-term trend and two more recent trends.

Figure 1. U.S. total motor gasoline trade


Changes in trends of gasoline production and consumption in the Midwest United States, in part, have driven this trend. Historically, the U.S. Gulf Coast (Petroleum Administration for Defense District (PADD) 3) supplied refined products to other regions of the United States where demand exceeded supply, such as the Midwest (PADD 2) and the U.S. East Coast (PADD 1). While the East Coast still relies on supplies from the Gulf Coast and still remains a large net importer of gasoline—619,000 b/d in 2016, the Midwest has reduced its need to draw supplies from the Gulf Coast in recent years. Midwest refineries now are running at higher rates and increased capacity, resulting in more Midwest gasoline demand being met from in-region production. Between 2006 and 2016, Midwest receipts of gasoline from the Gulf Coast declined by 278,000 b/d to 273,000 b/d.


Because of logistical and economic constraints on sending increasing gasoline supplies from the Gulf Coast to other regions, the volumes of gasoline no longer demanded by the Midwest have become available for export. With the Rocky Mountain (PADD 4) and U.S. West Coast (PADD 5) relying largely on in-region or domestic supplies, the balance of U.S. net gasoline imports or exports is between East Coast imports and Gulf Coast exports. Between 2013 and 2016, Gulf Coast gasoline exports increased by 236,000 b/d (54%), while East Coast imports increased by 41,000 b/d (7%), resulting in a shift for the United States as a whole.

Figure 2. PADD total motor gasoline trade


Available Gulf Coast gasoline supplies come at a time when both domestic and nearby fuel markets are experiencing increasing demand for multiple petroleum products, including gasoline. A majority of the growth in U.S. gasoline exports has been to markets in Mexico and Central and South America. In the first half of 2017, Mexico accounted for 53% of the 755,000 b/d of U.S. total motor gasoline exports. Low utilization of Mexican refineries and the ongoing market reforms of Mexico’s retail fuel distribution have resulted in continued increased demand for gasoline supplies from the U.S. Gulf Coast.


At the same time, U.S. domestic gasoline consumption has been increasing to record levels. U.S. gasoline consumption, as measured by product supplied, set a new monthly record high of 9.8 million b/d in August 2017. To meet the combined record domestic gasoline demand and the increased export demand for multiple petroleum products—including gasoline—U.S. refineries have been running at increasingly higher rates. U.S. gross refinery inputs set a record high of 17.8 million b/d for the week ending August 25 and have been higher than the five-year range for a majority of 2017 (Figure 3).

Figure 3. U.S. gross refinery inputs


If the trends of increasing demand from export markets and U.S. refineries producing near record levels of gasoline continues, the United States is likely to become a monthly net exporter of gasoline more consistently.


U.S. average regular gasoline prices fall, diesel prices increase


The U.S. average regular gasoline retail price fell nearly 4 cents from the previous week to $2.53 per gallon on November 27, up 38 cents from the same time last year. The Midwest price fell eight cents to $2.42 per gallon, the Gulf Coast price fell over two cents to $2.26 per gallon, the East Coast and West Coast prices each fell nearly two cents to $2.51 per gallon and $3.04 per gallon, respectively, and the Rocky Mountain price fell less than one cent, remaining at $2.54 per gallon.


The U.S. average diesel fuel price increased over 1 cent to $2.93 per gallon on November 27, 51 cents higher than a year ago. The Rocky Mountain and Gulf Coast prices each increased over two cents to $3.03 per gallon and $2.71 per gallon, respectively, the East Coast and Midwest prices each increased one cent to $2.91 per gallon and $2.88 per gallon, respectively, and the West Coast price increased less than one cent, remaining at $3.38 per gallon.


Propane inventories decline


U.S. propane stocks decreased by 0.6 million barrels last week to 73.2 million barrels as of November 24, 2017, 10.4 million barrels (12.5%) lower than the five-year average inventory level for this same time of year. Gulf Coast, Midwest, and Rocky Mountain/West Coast inventories decreased by 0.5 million barrels, 0.3 million barrels, and 0.2 million barrels, respectively, while East Coast inventories rose by 0.5 million barrels. Propylene non-fuel-use inventories represented 3.5% of total propane inventories.


Residential heating oil and propane prices continue to increase


As of November 27, 2017, residential heating oil prices averaged $2.85 per gallon, over 2 cents per gallon more than last week and almost 45 cents per gallon higher than last year’s price at this time. The average wholesale heating oil price for this week is just under $2.04 per gallon, nearly 1 cent per gallon less than last week but 45 cents per gallon higher than a year ago.


Residential propane prices averaged $2.43 per gallon, almost 2 cents per gallon more than last week and nearly 36 cents per gallon higher than a year ago. Wholesale propane prices averaged $1.12 per gallon, unchanged from last week but 48 cents per gallon higher than last year's price.

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November, 15 2018
Your Weekly Update: 12 - 16 November 2018

Market Watch

Headline crude prices for the week beginning 12 November 2018 – Brent: US$71/b; WTI: US$60/b

  • Crude prices continue their retreat from recent highs, as a bear market engulfed sentiment last week over fears of oversupply from frantic OPEC+ pumping offsetting the loss of Iranian crude volumes, which itself was mitigated by the US handing out waivers to eight key crude importers
  • After stating that OPEC was in a ‘pump as much as you can’ mode, the quick fall in prices has caused alarm across the cartel, with Saudi Arabia reversing gear to curb its exports by 500,000 b/d in December to shore up prices
  • With the OPEC meeting in Vienna imminent, it is possible that a new output cut agreement could be reached within OPEC+, to counter an oversupply situation stemming from declining demand, as well as surging US shale production – which will rise to a record 7.94 mmb/d across seven major shale basins in December, according to the EIA
  • However, beyond Saudi Arabia, there is not much appetite within the OPEC+ alliance to reduce output, with Iraq happy with its record production and Russia dismissing the oversupply situation as a ‘seasonal glitch’
  • Saudi Arabia’s plan to cut its oil production was criticised by US President Donald Trump, stung by losses in midterm elections that Trump chalks up to, in part, high fuel prices
  • News that Saudi Arabia was researching the topic of breaking up OPEC rattled the markets, but the Kingdom moved to quash rumours as Aramco raised the pricing for its medium and heavy crudes sold to Asia
  • Despite this, trends have turned bearish for crude prices over this week, propelled by large jumps in US crude output and worries over a global economic slowdown, particularly in China; Brent and WTI fell by over US$4/b on Tuesday alone, falling below the US$70/b and US$60/b levels again
  • After several weeks of caution, US drillers added 14 new rigs this week – up by 12 oil rigs and 2 gas rigs to 1,081 in total – with the most gains once again coming from the prolific Permian Basin
  • Crude price outlook: After the large drop on Tuesday, crude prices appear to have stabilised somewhat around the US$65-66/b level for Brent and the US$55-56/b level for WTI


Headlines of the week

Upstream

  • Another setback for TransCanada’s beleaguered Keystone XL pipeline, as a judge in Montana halted the project over two lawsuits filed asserting that its environmental impact assessment required further review
  • Phillips 66 and Bridger Pipeline are launching two new crude pipelines connecting Rockies and Bakken oil to the Texas Gulf Coast; the Liberty Pipeline will carry 350 kb/d from Bakken/Rockies to Corpus Christi, while the 400 kb/d Red Oak Pipeline connects Corpus Christi to Houston
  • Magellan Midstream Partners is looking to build a new pipeline connecting Cushing to Houston, with the 250 kb/d Voyager pipeline targeted at end-2020
  • The Kurdistan Regional Government in Iraq has increased capacity of its oil pipeline from Kirkuk to Ceyhan, Turkey, from 700,000 b/d to 1 mmb/d
  • After previously fleeing from Canadian oil sands, ExxonMobil is investing again, with its Imperial Oil unit earmarking some US$2 billion for the new Aspen project in northern Alberta
  • Senrica Energy continues its buying spree in the North Sea, acquiring Marubeni Oil & Gas’ 3.75% and 8.33% interest in the Bruce and Keith fields
  • ADNOC is implementing a comprehensive hydrocarbons strategy that will increase its crude output capacity to 4 mmb/d by 2020 and 5 mmb/d by 2030
  • Croatia has launched the country’s second onshore licensing round, offering seven blocks in the prolific Pannonian basin
  • Eni and Lukoil have signed a farm-out deal, transferring participating interests in three shallow-water offshore Mexican licenses, including Area 10, 12 and 14
  • Buoyed by recent gas successes, Israel has announced its second offshore licensing round, offering up 19 blocks in its southern waters
  • Senegal is overhauling its own code, with plans to raise royalties and have the state take a bigger stake in projects after a string of major discoveries
  • CNOOC is kickstarting a development drive aimed at eking out additional volumes from several marginal fields in Bohai Bay and the South China Sea

Downstream

  • Nigeria’s ambitious overhaul of its state-owned refineries has been pushed back to end-2019 over slow progress in NNPC’s attempt to seek joint financing
  • NNPC is looking to sign crude-for-product swap deals with Shell and ExxonMobil, after signing one with BP, to acquire crude for its refineries
  • France is pushing ahead with its attempt to introduce a new fuel tax, despite a series of major blockades and protests planned to oppose the measure

Natural Gas/LNG

  • Total and Sempra Energy have signed a new MoU on LNG cooperation, covering the Cameron LNG in Louisiana, USA and Energía Costa Azul in Baja California, Mexico, with Total potentially taking up to 9 mtpa of LNG for its global portfolio from both projects
  • Cuadrilla has had first shale gas flow at its exploration well in the UK’s Preston New Road site, sparking optimism for the commercialisation of Bowland Shale
  • Croatia has picked Golar Power to deliver an FSRU for a planned floating LNG terminal in the northern Adriatic Sea
  • Tellurian confirms that construction on its Driftwood LNG terminal Louisiana will begin in 2H2019, which operations planned to begin in 2023
  • Japan’s Toshiba Corp is exiting the US LNG business, selling off its assets to China’s ENN Ecological Holdings for over US$800 million
November, 15 2018