Explosion at Philadelphia refinery: Update 4

  • Market: Crude oil, Oil products
  • 21/06/19

Adds Laurel context, updates price information.

New York Harbor gasoline futures settled higher today but physical prices were slower to rise as the market waited to see how a fire at the east coast's largest refinery would change supplies.

An early-morning explosion and fire damaging an alkylation unit at Philadelphia Energy Solutions' (PES) 330,000 b/d refinery in Philadelphia, Pennsylvania, continued to burn late this morning, hours after firefighters brought the blaze under control. Conventional gasoline blendstock, or CBOB, could be particularly affected in the central Atlantic and western Pennsylvania markets PES supplied.

July Nymex RBOB futures increased by 6.98¢/USG to settle at $1.8561/USG, the largest one-day increase since early March.

Physical prices for several New York Harbor grades rose by roughly 2¢/USG. New York Harbor 7.8 RVP CBOB for Buckeye or barge lifting narrowed its discount to July Nymex by 2¢/USG to 6¢/USG. Prices for US Gulf coast gasoline, a major supplier to the Atlantic coast, were muted in initial response to the fire. Chicago gasoline, which can travel through Ohio to the Pittsburgh market, traded lower despite anticipated higher demand from Pennsylvania.

The Philadelphia refinery supplies the east coast's central Atlantic market around the New York Harbor as well as western Pennsylvania through the Laurel pipeline system. Bids on that pipeline, through which PES sent 20pc of its 2016 production, vanished today. But a fire earlier this month on the refinery's fluid catalytic cracking (FCC) unit and a Laurel outage near Pittsburgh kept the market uncertain about the newest outage's impact.

A butane vat exploded and burned at around 4am ET, triggering a shelter-in-place advisory for the surrounding community and causing minor injuries to four workers, according to firefighters and the refiner.

PES said that three separate explosions hit the alkylation unit, which uses acid and catalyst to combine butane and olefins into a high-octane gasoline blendstock called alkylate. The broader refining complex continued to operate at a reduced rate, the company said. Union leadership declined to comment.

A 10 June fire on a fluid catalytic cracking unit, which converts vacuum gas oil to gasoline blendstocks and other products, had already disrupted the refinery's fuel production. PES has said the two incidents were not connected.

Market haze

PES operates the single largest refinery on the east coast but the region has other major suppliers. PBF Energy operates 360,000 b/d of refining capacity in New Jersey and Delaware and Phillips 66 operates the 250,000 b/d Bayway refinery in Linden, New Jersey. Delta Air Lines subsidiary Monroe Energy operates a 185,000 b/d refinery in Trainer, Pennsylvania, not far from PES. Monroe assisted in the initial fire response.

The central Atlantic region where those refineries operate reported 32.4mn bl of gasoline blendstocks in storage last week, 1pc lower than the five-year average for the month after a 880,000 bl draw. US Gulf coast refiners supply the region through the Colonial Pipeline system, but prices in Texas and Louisiana did not move significantly following the fire.

The incident could tighten the European gasoline market, where premiums to crude have been steadily narrowing in recent weeks, and draw more fuel supply from the US Gulf coast. The US Atlantic coast is the primary destination for excess European gasoline. RBOB's premium to Ice Brent crude futures widened by $2.18/bl to $12.76/bl, its largest move since March. New York Harbor drew approximately 297,000 b/d of gasoline and blendstocks from overseas suppliers — mostly Europe — so far in June, down from approximately 382,000 b/d in May. Transatlantic arbitrage movers were expected to book spot fixtures for prompt loading on a journey that takes 10 days to reach New York from Europe's ARA hub. Cargoes already at sea for other destinations could also be rerouted.

The refinery processes a mostly light sweet crude diet of west African and North Atlantic crude. Imports averaged below half of its 330,000 b/d capacity in the first quarter, at roughly 150,000 b/d. PES averaged 229,500 b/d of crude imports in the first quarter of 2018, and 236,000 b/d for the full year. Two Suezmaxes carrying west African crude are currently on route to the refinery.

PES exited bankruptcy last year under new majority ownership. The company blamed its financial condition on federal fuel blending laws. Bankruptcy documents showed the company had also made an ill-timed bet on the future of railed Bakken crude deliveries to the east coast. PES served as a backdrop to refiner efforts and a rally with US Senator Ted Cruz (R-Texas) last year campaigning against biofuel blending standards.

The refiner, a major Philadelphia employer, may now add new political pressure to its financial headwinds. Philadelphia mayor Jim Kenney (D) praised the response but said he would convene refinery and fire officials to discuss the refinery and the surrounding community. The US Chemical Safety Board, an independent investigative agency, was sending a team to the refinery today. And the accident's involvement of an alkylation unit using hydrofluoric acid may pull the site into broader scrutiny of such units already underway in California.


Sharelinkedin-sharetwitter-sharefacebook-shareemail-share

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News
28/03/24

Stalling climate finance an energy security risk : WRI

Stalling climate finance an energy security risk : WRI

London, 28 March (Argus) — The "best bet" to achieving global energy security is through mitigation funding and multilateral cooperation, according to the World Resources Institute (WRI). WRI highlighted that governments are funding more domestic renewable energy projects but have increased oil and gas production in the name of "energy security" at home in the years following the Russia's invasion of Ukraine. The recent rebrand of energy transition funding to energy security funding has allowed some developed nations to justify domestic oil and gas licences and drag their feet on multilateral financial commitments. This is causing "real worry" among climate-vulnerable developing nations, WRI chief executive Ani Dasgupta said. He said that although the initial "shock" to the world's energy markets after the invasion of Ukraine "quickly went away", it has triggered "real worry among poorer countries that when push comes to shove, it won't be an even game, or have a fair outcome." Developing countries have long complained about the lack of access to climate funding. Richer nations have only recently met the $100bn/yr target in climate finance to developing countries agreed in 2009, while discussions on setting a new climate finance goal for 2025 at Cop 29 in Baku in November could prove difficult. President of the Republic of Congo (Brazzaville) Denis Sassou-Nguesso said last year that the $100bn/yr in climate financing to developing countries promised by rich countries "never reached us", adding that the annual UN Cop climate conferences have become little more than a talking shop. "Just after the invasion of Ukraine, every country started to think about energy security," Dasgupta said. "In theory, good things could have happened, countries could have concluded that their best bet to getting energy security is by going renewable". But it was not the case in key consumer countries or regions, Dasgupta pointed out. China bought the majority of Russian gas following the EU's withdrawal, he said, and has since upped production at coal-fired power stations despite an "extraordinary" acceleration towards renewables set for 2023-28, according to Paris-based energy watchdog IEA . In Europe, the UK and Norway continue to award new oil and gas licences . "In the US, the fossil fuel lobby argues that the best route to energy security is to invest more in fossil fuels". But the best route is to invest in more renewables, he said. "Even if the US produces a large amount of oil and gas, it is still a traded commodity, and so you have to pay a price for it that is set globally." The US special presidential co-ordinator for energy security Amos Hochstein has also suggested in September that a widening climate finance gap could ultimately threaten global security. "We have seen the percentage of dollars spent on the energy transition outside the OECD, in developing and middle income countries actually go down instead of up…" By Madeleine Jenkins Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Read more
News

ACT to partner with LR, Wartsila, and UECC on CNSL


28/03/24
News
28/03/24

ACT to partner with LR, Wartsila, and UECC on CNSL

London, 28 March (Argus) — Dutch supplier ACT Group is collaborating with classification society Lloyd's Register, Finnish engine manufacturer Wartsila, and Norwegian shipping firm United European Car Carriers (UECC) on the development and evaluation of cashew nut shell liquid (CNSL) as a biofuel in marine biodiesel blends. ACT confirmed the launch of a CNSL-based biofuel called "FSI.100", which has gone through extensive engine testing with various blend combinations. The CNSL-based biofuel has now received approval from engine manufactures to be blended as a 30pc component with marine gasoil (MGO) to form a marine biodiesel blend for the purpose of further sea trials. ACT confirmed that the FSI.100 product will benefit from lower acidity, and there is potential for the product to be compatible for blending with fuel oil. CNSL is an advanced biodiesel feedstock, making it a more appealing and price competitive option to buyers compared with other biodiesel feedstocks. The development follows a report by Lloyd's Register fuel oil bunkering analysis and advisory service (FOBAS) that pointed to a correlation between engine fuel pump and injector-related damage in vessels and the presence of "unestablished" CNSL in the utilised marine fuels. By Hussein Al-Khalisy Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Baltimore bridge collapse to raise retail fuel prices


27/03/24
News
27/03/24

Baltimore bridge collapse to raise retail fuel prices

Houston, 27 March (Argus) — The collapse of the Francis Scott Key Bridge in Baltimore, Maryland, is more likely to increase regional gasoline prices than diesel due to additional freight costs and certain route restrictions. Suppliers in the region have so far signaled that the effect on broader markets will be minimal, but regional prices will likely rise, especially as peak summer demand season begins with Memorial Day weekend in late May. The bridge closure could pose more problems for gasoline supply than diesel, since gasoline cannot be transported through the Fort McHenry (I-95) and Baltimore Harbor (I-895) tunnels — the two other major roads that cross the Patapsco River at Baltimore — while there are no restrictions on diesel, according to the Maryland Transportation Authority (MTA). Fuel wholesaler Global Partners said yesterday that it would like to see hours of service waivers for trucking in the region to minimize fuel supply disruption to customers, but the Federal Motor Carrier Safety Administration (FMCSA) is yet to issue one. Elevated retail prices are likely to be limited to the immediate Baltimore area but could spill over into neighboring markets should trucking markets remain tight due to rerouting, market sources told Argus . Fuel markets in eastern Maryland can be supplied by PBF's 171,000 b/d Delaware City, Delaware, refinery and two further plants in Pennsylvania — Monroe Energy's 190,000 b/d Trainer refinery and PBF's 160,000 b/d Paulsboro refinery. To the north, United Refining runs a 65,000 b/d plant in Warren, Pennsylvania, and along the Atlantic coast Phillips 66 operates the 259,000 b/d Bayway refinery in Linden, New Jersey. PBF, Monroe and United did not immediately respond to a request for comment on whether the bridge collapse is affecting refinery operations. Phillips 66 declined to comment on commercial activities. Still, the five nearby refineries — representing all the Atlantic coast's 850,000 b/d of crude processing capacity — are unlikely to see their operations curtailed by limits in shipping products to Maryland. With no refinery in the state of Maryland, most fuels are delivered to Baltimore by Gulf coast refiners on the Colonial Pipeline. Global Partners, which operates a terminal just west of the collapsed bridge, said yesterday it is primarily supplied by the pipeline and expects product flows to continue. Several terminals in the Baltimore Harbor and the nearby Port Salisbury can also receive small vessels and barges of road fuels from Delaware and Pennsylvania, according to the Maryland Energy Administration (MEA). The Port of Baltimore — which remains closed since the collapse — took delivery of 24,000 b/d of gasoline and under 2,000 b/d of distillates from barges and small vessels in 2019, about three percent of the Atlantic coast's refining capacity. "A closure of the Port of Baltimore while the Colonial Pipeline is open would not significantly disrupt fuel supply," the MEA wrote in a 2022 analysis of liquid fuels supply in the state. By Nathan Risser Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

US breaks $79/bl ceiling in latest SPR purchase


27/03/24
News
27/03/24

US breaks $79/bl ceiling in latest SPR purchase

Washington, 27 March (Argus) — President Joe Biden's administration has exceeded a price ceiling that has guided when the US government would buy crude to refill the US Strategic Petroleum Reserve (SPR), with the latest crude purchase hitting a price of $81.32/bl. The US Department of Energy (DOE) six months ago adopted a new strategy for replenishing the SPR, with a plan to use consistent monthly purchases to replace some of the 180mn bl of crude that Biden sold from the reserve in 2022 after the start of the Russia-Ukraine conflict. For months, DOE has said it would continue to buy crude so long as it was a "good deal for taxpayers," which the agency defined as a purchase price not to exceed $79/bl. But the agency's latest crude purchase, for nearly 2.8mn bl of sour crude for delivery in September, came at a cost of $225.6mn, an average price of $81.34/bl, according to data DOE recently published on its website. The crude contracts went to Macquarie Commodities Trading, Sunoco Partners Marketing & Terminals and Total's Atlantic Trading & Marketing. DOE, asked for comment about why it purchased crude in excess of its price target, said there would "likely be news coming later today." Before this week, the administration had largely adhered to its $79/bl price target to buy 24.7mn bl of crude for delivery to the SPR from January through August, with the exception of a $79.10/bl purchase for January delivery. DOE reiterated the price ceiling on 14 March, when it announced a new solicitation to buy crude, and last year had called off multiple crude solicitations when prices came in too high. DOE has previously increased its price ceiling based on shifts in the oil market. DOE in 2022 had initially targeted a purchase price of $67-$72/bl, resulting in the purchase of 6.3mn bl of crude last summer at an average price of $72.67/bl. But after rising prices put that target out of reach, DOE raised its price ceiling to $79/bl. The SPR held 363mn bl of crude as of 22 March, according to federal data. By the end of this year, as a result of crude purchases, the reserve is expected to "be back to essentially where we would have been had we not sold during the invasion of Ukraine," US energy secretary Jennifer Granholm said on 20 March, after accounting for the cancellation of 140mn bl of congressional mandated crude sales that were scheduled through 2031. With the latest crude purchase, DOE will have signed contracts to buy 32.4mn bl of crude at an average price of nearly $77/bl, of which more than 19mn bl has yet to be delivered to the SPR. Another 20mn bl of crude that oil companies and traders borrowed from the SPR in 2022 is set to be returned by year-end, which would push inventories in the reserve to above 400mn bl. By Chris Knight Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

South Sudan crude output halves on pipeline blockage


27/03/24
News
27/03/24

South Sudan crude output halves on pipeline blockage

London, 27 March (Argus) — South Sudan's crude production has almost halved to around 80,000 b/d because of a blockage at a pipeline in war-torn Sudan, South Sudan's oil ministry undersecretary William Anyak Deng told Argus today. A blockage along the Chinese-led Petrodar Pipeline is currently preventing around 100,000 b/d of South Sudan's heavy sweet Dar Blend grade from reaching Sudan's Bashayer terminal on the Red Sea for export, Deng said. But production of South Sudan's medium sweet Nile Blend grade has not been impacted, as this is transported to Bashayer through the separate Greater Nile oil pipeline which remains online, he said. His comments come after Sudan earlier this month warned major oil exporting companies in South Sudan that his country could no longer carry out its obligation to transport their crude . Dar Petroleum Operating Company (DPOC) — a consortium including China's state-controlled CNPC and Sinopec and Malaysia's state-owned Petronas — produces Dar Blend but has had to all but cease output, Deng said. Nile Blend production is split between the South Sudan-based firms Sudd Petroleum Operating Company (SPOC) and Greater Pioneer Operating Company (GPOC) and currently running at around 80,000 b/d, he added. South Sudan's crude production stood at around 150,000 b/d in February, according to Argus estimates. The blockage is a result of gelling issues — solidifying crude — in the Petrodar Pipeline, which Sudanese and South Sudanese engineers are struggling to resolve. This is because of a lack of diesel that is used to heat the crude or dilute it to help it flow, Deng said. "We are working to resolve the problem right now. There is mechanical work that is ongoing, we are trying to flush out the oil," he added. But the pipeline has been suffering from leaks and pressure drops for months, with repairs complicated by the ongoing civil war in Sudan between the army and the paramilitary Rapid Support Forces. Deng said it was becoming increasingly difficult to get permission from the warring parties in Sudan to move workers, equipment and spare parts to maintain infrastructure. He also said South Sudan has been sending diesel to Sudan to help with repair work given the closure of Sudan's 100,000 b/d Khartoum refinery which has come under repeated fire since the civil war began last year. Sudan also typically produces around 50,000 b/d of mostly Nile Blend crude, but this is thought to have been impacted by the civil war. Crude exports from Sudan's Bashayer port averaged 130,000 b/d in 2023 and hit 168,000 b/d in January, according to Kpler. But exports have only averaged about 75,000 b/d since February. Landlocked South Sudan is entirely reliant on Sudan to export its crude and depends on oil sales for more than 90pc of government revenues. Any prolonged disruption to exports would put the country's economy in a precarious position. By Aydin Calik Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more