U.S. Gulf Coast crude oil imports averaged 1.8 million barrels per day (b/d) in March 2019, the lowest level since March 1986 and significantly lower than the peak of 6.6 million b/d in March 2007. Preliminary weekly data indicate that Gulf Coast crude oil imports have averaged about 1.9 million b/d through April and May (Figure 1). Falling crude oil imports into the U.S. Gulf Coast so far in 2019 are the result of both recent events and continuing longer-term trends. Recently, sanctions on Venezuelan imports and heavy refinery maintenance have reduced imports. At the same time, imports to the Gulf Coast have also decreased because of sharp declines in imports from the Organization of the Petroleum Exporting Countries (OPEC) following an agreement among members to reduce production and because imports are being replaced by increased production of domestic crude oil. Together, these trends have fundamentally changed how the Gulf Coast region is supplied with crude oil. In the past five consecutive months, the U.S. Gulf Coast has exported more crude oil than it imported (net exports), and since 2015, it has consistently received more crude oil from other regions of the United States than it has sent to other regions (net receipts).
Gulf Coast crude oil imports are typically lower in the early months of the year as refineries reduce runs as part of their seasonal maintenance. This year, planned maintenance activity was higher than usual. The four-week average of gross refinery inputs in the Gulf Coast fell from 9.6 million b/d for the week ending January 4, higher than the five-year (2014-18) maximum and 648,000 b/d higher than the five-year average, to a low of about 8.6 million b/d from mid-February until mid-April. Although 8.6 million b/d of gross refinery inputs is more than the Gulf Coast’s five-year average level for the period, eight consecutive weeks of relatively flat refinery runs is longer than normal during refinery maintenance at this time of year. This extended period of lower refinery runs for longer in the early months of 2019 reduced the need for crude oil imports, contributing to the more-than-three-decade-low crude oil imports during this period.
Around the same time, the U.S. government announced additional sanctions on Venezuela that included limitations on crude oil imports from Venezuela. In 2018, 20% of all Gulf Coast crude oil imports were from Venezuela, an annual average of 498,000 b/d. The Gulf Coast was the destination for 98% of all U.S. imports of Venezuelan crude oil in 2018. Because of the imposition of sanctions, refiners in the Gulf Coast sharply reduced imports of Venezuelan crude oil. Between January and March 2019, Gulf Coast imports of crude oil from Venezuela fell by 498,000 b/d to 47,000 b/d in March. As a result of the Gulf Coast reductions, U.S. four-week average imports from Venezuela fell from 603,000 b/d for the week ending January 25 to 12,000 b/d for the week ending May 31 (Figure 2).
An additional change in Gulf Coast crude oil imports occurred following a November 2016 agreement by OPEC members to cut crude oil production. As a result of the production cuts, many OPEC members reduced exports to the United States in favor of growing markets in Asia. One year after the production-cut agreement, crude oil imports from OPEC processed at Gulf Coast refineries had fallen 562,000 b/d from 2.1 million b/d in November 2016 to 1.5 million b/d in November 2017. Imports of crude oil from OPEC members into the Gulf Coast continued to decline, falling to 1.4 million b/d in 2018 and down to 513,000 b/d in March 2019 (Figure 3).
Before the OPEC production cuts in 2016, the Gulf Coast had already started reducing crude oil imports because of rising domestic production and changes in domestic crude oil pipeline infrastructure. Gulf Coast crude oil production increased from 2.7 million b/d in 2008 to 7.9 million b/d in March 2019. Much of this increased crude oil production was of light sweet crude oil that allowed Gulf Coast refineries to reduce imports of light sweet crude oil from foreign sources. Then pipeline infrastructure that once took imported crude oil from the Gulf Coast and delivered it to other regions of the United States was reversed, instead delivering increased domestic crude oil production and imports from Canada to Gulf Coast refineries. By 2015, this reversal meant that the Gulf Coast changed from being a net shipper of crude oil to other U.S. regions to being a net recipient. More recently, as imports have declined and crude oil exports have expanded, the Gulf Coast actually exported more crude oil than it imported for five consecutive months (Figure 4).
Because of all these changes combined, foreign-sourced crude oil receipts at Gulf Coast refineries accounted for an average of 36% of Gulf Coast refinery crude oil inputs in 2018, compared with 73% in 2008. The sources of those imports have also changed, with Canada and Mexico accounting for 54% of all imported crude oil processed in Gulf Coast refineries in March, representing a new high.
U.S. average regular gasoline and diesel prices fall
The U.S. average regular gasoline retail price fell nearly 2 cents from the previous week to $2.81 per gallon on June 3, more than 13 cents lower than the same time last year. The Gulf Coast price fell nearly 5 cents to $2.42 per gallon, the West Coast price fell nearly 4 cents to $3.60 per gallon, and the East Coast price fell more than 3 cents to $2.66 per gallon. The Midwest price rose more than 3 cents to $2.75 per gallon and the Rocky Mountain price increased slightly, remaining at $2.98 per gallon.
The U.S. average diesel fuel price fell nearly 2 cents to $3.14 per gallon on June 3, nearly 15 cents lower than a year ago. The West Coast price fell more than 2 cents to $3.76 per gallon, the Rocky Mountain and Gulf Coast prices each fell nearly 2 cents to $3.16 per gallon and $2.88 per gallon, respectively, and the Midwest and East Coast prices each fell over 1 cent to $3.03 per gallon and $3.15 per gallon, respectively.
Propane/propylene inventories rise
U.S. propane/propylene stocks increased by 2.5 million barrels last week to 68.3 million barrels as of May 31, 2019, 9.1 million barrels (15.4%) greater than the five-year (2014-2018) average inventory levels for this same time of year. Gulf Coast inventories increased by 1.2 million barrels, and Midwest and East Coast inventories each increased by 0.7 million barrels. Rocky Mountain/West Coast inventories decreased slightly, remaining virtually unchanged. Propylene non-fuel-use inventories represented 7.2% of total propane/propylene inventories.
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The 9th edition of the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC) Awards, hosted by the Abu Dhabi National Oil Company (ADNOC), is now open for submissions.
In this fourth industrial age it is technology, innovation, environmental leadership and talented workforces that are shaping the companies of the future.
Oil and gas is set to play a pivotal role in driving technology forward, and at this year’s ADIPEC Awards emphasis is placed on digitalisation, research, transformation, diversity, youth and social contribution, paving the way towards a brighter tomorrow for our industry.
Hosting the ADIPEC Awards is one of the world’s leading energy producers, ADNOC, a company exploring new, agile and flexible ways to build its people, technology, environmental leadership and partnerships, while enhancing the role of the United Arab Emirates as a global energy provider.
Factors which will have a prominent influence on the eventual decisions of the distinguished panel of jury members include industry impact, sustainability, innovation and value creation. Jury members have been carefully selected according to their expertise and knowledge, and include senior representatives from Baker Hughes, a GE Company, BP UAE, CEPSA Middle East, ENI Spa, Mubadala Petroleum, Shell, Total and Weatherford.
Chairperson of the awards is Fatema Al Nuaimi, Acting CEO of ADNOC LNG, who says: “At a time when the industry is looking towards an extremely exciting future and preparing for Oil &Gas 4.0, the awards will recognise excellence across all its sectors and reward those who are paving the way towards a successful and sustainable future.”
Ms Al Nuaimi, continues: “we call upon our partners across the globe to submit their achievements in projects and partnerships which are at the helm of technical and digital breakthroughs, as well as to nominate the next generation of oil and gas technical professionals, who will spearhead the ongoing transformation of the industry.
These awards are recognising the successes of those companies and individuals who are responding in the most innovative and creative manner to the global economic and technological trends. Their contribution is pivotal to the development of our industry and to addressing the continuous growth of the global energy demand. “
Christopher Hudson, President of the Energy Division, dmg events, organisers of ADIPEC, says: “With ADNOC as the host and ADIPEC as the platform for the programme, the awards are at the heart of the worldwide oil and gas community. With its audience of government ministers, international and national oil companies, CEOs and other top global industry influencers, the ADIPEC Awards provide the global oil and gas community the perfect opportunity to engage, inspire and influence the workforce of the future.”
Entries can be submitted until Monday 29th July for the following categories:
Breakthrough Technological Project of the Year
Breakthrough Research of the Year
Digital Transformation Project of the Year
Social Contribution and Local Content Project of the Year
Oil and Gas Inclusion and Diversity Company of the Year
Young ADIPEC Technical Professional of the Year
A shortlist of entries will be announced in October and winners will be revealed on the first day of ADIPEC 2019, Monday 11th November, St. Regis Saadiyat Island, Abu Dhabi.
Held under the patronage of the President of the United Arab Emirates, His Highness Sheikh Khalifa Bin Zayed Al Nahyan, and organised by the Global Energy Division of dmg events, the Abu Dhabi Petroleum International Petroleum Exhibition and Conference (ADIPEC) is the global meeting point for oil and gas professionals. Standing as one of the world’s leading oil and gas events. ADIPEC is a knowledge-sharing platform that enables industry experts to exchange ideas and information that shape the future of the energy sector. The 22nd edition of ADIPEC will take place from 11th-14th November 2019, at the Abu Dhabi National Exhibition Centre (ADNEC). ADIPEC 2019 will be hosted by the Abu Dhabi National Oil Company (ADNOC) and supported by the UAE Ministry of Energy & Industry, Department of Transport in Abu Dhabi, the Abu Dhabi Chamber of Commerce and Industry, Masdar, the Abu Dhabi Future Energy Company, Department of Culture and Tourism - Abu Dhabi, the Abu Dhabi Department of Education and Knowledge (ADEK). dmg events is committed to helping the growing international energy community.
Source: U.S. Energy Information Administration, based on World Input-Output Database
Note: Dollar values are expressed in 2010 U.S. dollars, converted based on purchasing power parity.
The industrial sector of the worldwide economy consumed more than half (55%) of all delivered energy in 2018, according to the International Energy Agency. Within the industrial sector, the chemicals industry is one of the largest energy users, accounting for 12% of global industrial energy use. Energy—whether purchased or produced onsite at plants—is very important to the chemicals industry, and it links the chemical industry to many parts of the energy supply chain including utilities, mines, and other energy product manufacturers.
The chemicals industry is often divided into two major categories: basic chemicals and other chemicals. Basic chemicals are chemicals that are the essential building blocks for other products. These include raw material gases, pigments, fertilizers, plastics, and rubber. Basic chemicals are sometimes called bulk chemicals or commodity chemicals because they are produced in large amounts and have relatively low prices. Other chemicals—sometimes called fine or specialty chemicals—require less energy to produce and sell for much higher prices. The category of other chemicals includes medicines, soaps, and paints.
The chemicals industry uses energy products such as natural gas for both heat and feedstock. Basic chemicals are often made in large factories that use a variety of energy sources to produce heat, much of which is for steam, and for equipment, such as pumps. The largest feedstock use is for producing petrochemicals, which can use oil-based or natural-gas-based feedstocks.
In terms of value, households are the largest users of chemicals because they use higher value chemicals, which are often chemicals that help to improve standards of living, such as medicines or sanitation products. Chemicals are also often intermediate goods—materials used in the production of other products, such as rubber and plastic products manufacturing, agricultural production, construction, and textiles and apparel making.
Source: U.S. Energy Information Administration, WEPS+, August 2018
Note: Dollar values are expressed in 2010 U.S. dollars, converted based on purchasing power parity.
The energy intensity of the basic chemicals industry, or energy consumed per unit of output, is relatively high compared with other industries. However, the energy intensity of the basic chemicals industry varies widely by region, largely based on the chemicals a region produces. According to EIA’s International Energy Outlook 2018, Russia had the most energy-intensive basic chemicals industry in 2015, with an average energy intensity of approximately 98,000 British thermal units (Btu) per dollar, followed by Canada with an average intensity of 68,000 Btu/dollar.
The Russian and Canadian basic chemicals industries are led by fertilizers and petrochemicals. Petrochemicals and fertilizers are the most energy intensive basic chemicals, all of which rely on energy for breaking chemical bonds and affecting the recombination of molecules to create the intended chemical output. These countries produce these specific basic chemicals in part because they also produce the natural resources needed as inputs, such as potash, oil, and natural gas.
By comparison, the energy intensity of the U.S. basic chemical industry in 2015 was much lower, at 22,000 Btu/dollar, because the industry in the United States has a more diverse production mix of other basic chemicals, such as gases and synthetic fibers. However, EIA expects that increasing petrochemical development in the United States will increase the energy intensity of the U.S. basic chemicals industry.
The United States exports chemicals worldwide, with the largest flows to Mexico, Canada, and China. According to the World Input-Output Database, U.S. exports of all chemicals in 2014 were valued at $118 billion—about 6% of total U.S. exports—the highest level in decades.
The threat of military action in the Middle East has gotten more intense this week. After several attacks on tankers that could be plausibly denied, Iran has made its first direct attack on a US asset, shooting down an unmanned US drone. The Americans say the drone was in international waters, while Iran claims that it had entered Iranian air space. Reports emerging out of the White House state the US President Donald Trump had authorised a military strike in response, but pulled back at the last minute. The simmering tensions between the two countries are now reaching boiling point, with Iran declaring that it is ‘ready for war’.
Predictably, crude oil prices spiked on the news. Brent and WTI prices rose by almost US$4/b over worries that a full-blown war will threaten global supplies. That this is happening just ahead of the OPEC meeting in Vienna – which was delayed by a week over internal squabbling over dates – places a lot of volatile cards on the table. Far more than more than surging US production, this stand-off will colour the direction of the crude market for the rest of 2019.
It started with an economic war, as the Trump administration placed increasingly tight sanctions on Iran. Financial sanctions came first, then sanctions on crude oil exports from Iran. But the situation was diffused when the US introduced waivers for 8 major importers of Iranian crude in November 2018, calming the markets. Even when the waivers were not renewed in April, the oil markets were still relatively calm, banking on the fact that Iran’s fellow OPEC countries would step in to the fill the gap. Most of Iran’s main clients – like South Korea, Japan and China – had already begun winding down their purchases in March, reportedly causing Iran’s crude exports to fall from 2 mmb/d to 400 kb/d. And just recently, the US also begun targeting Iranian petrochemical exports. Between a rock and a hard place, Iran looks seems forced to make good on its threats to go to war in the strategic Straits of Hormuz.
As the waivers ended, four tankers were attacked off the coast of Fujairah in the UAE in May. The immediate assumption was that these attacks were backed by Iran. Then, just a week ago, another two tankers were attacked, with the Americans showing video evidence reportedly show Iranian agents removing mines. But still, there was no direct connection to Iran for the attacks, even as the US and Iran traded diplomatic barbs. But the downing of the drone is unequivocally the work of the Iranian military. With President Donald Trump reportedly ‘bored’ of attempting regime change in Venezuela and his ultra-hawkish staff Mike Pompeo and John Bolton in the driver’s seat, military confrontation now seems inevitable.
This, predictably, has the oil world very nervous. Not just because the extension of the current OPEC+ deal could be scuppered, but because war will impact more than just Iranian oil. The safety of the Straits of Hormuz is in jeopardy, a key node in global oil supply through which almost 20 mmb/d of oil from Iraq, Saudi Arabia, Kuwait and the UAE flows along with LNG exports from the current world’s largest producer, Qatar. At its narrowest, the chokepoint in the Straits is just 50km from Iranian land. Crude exports could be routed south to Red Sea and the Gulf of Aden, but there is risk there too; the mouth of the Red Sea is where Iranian-backed Yemeni rebels are active, who have already started attacking Saudi land facilities.
This will add a considerable war risk premium to global crude prices, just as it did during the 1990 Gulf War and the 2003 invasion of Iraq. But more than just prices, the destabilising effects of a war could consume more than just the price of a barrel. If things are heading the way the current war-like signs are heading, then the oil world is in for a very major change very soon.
Historical crude price responses to wars in the Middle East