Viewpoint: USGC fuel arbitrage opportunities to grow
Arbitrage opportunities to ship gasoline out of the US Gulf coast are expected to rise in 2021 from 2020's lows as domestic and overseas demand is expected to recover from the Covid-19 devastation with newly approved vaccines.
Even as the pandemic enters its worst phase yet this winter, gasoline consumption has charted a slow recovery over the past few months. Albeit uneven, the recovery is expected to pick up pace next year as the vaccine could tame the virus and in turn spur road travel.
The pandemic has limited the usual outlets for US Gulf coast gasoline producers this year, including the US Atlantic coast and midcontinent regions, which are both connected to the Gulf coast via pipelines.
Additionally, many Latin American countries that rely heavily on imports from the US Gulf to meet domestic demand have cut their imports this year. Between January and September 2020, US Gulf coast finished motor gasoline exports to Mexico — which accounts for roughly 60pc of the region's gasoline exports — totaled 104.65mn bl, down by nearly 10pc from the same nine month period in 2019, according to the US Energy Information Administration (EIA).
Gasoline demand in the US Gulf coast has followed a similar pattern for years, with the summer driving season always buoying demand towards the middle of the year. This year, amid unprecedented conditions, gasoline demand — as measured using the EIA's product supplied as a proxy — plummeted to record lows.
In the past five years US product supplied of finished motor gasoline has ranged regularly between 8.261mn and 9.777mn b/d. But in April 2020 demand dropped to 5.329mn b/d, the lowest level since the EIA began tracking data in March 1991.
The US Atlantic coast has always been one of the largest importers of US Gulf coast barrels, with the Colonial Pipeline shipping roughly 45pc of fuel consumed along the US east coast.
In recent years, even before the emergence of Covid-19, demand to ship along the Colonial Pipeline's main gasoline bearing Line 1 diminished. The line used to regularly reach allocation — meaning demand to ship exceeded the line's capacity — for all 72 cycles of the year up until 2017. It was at this point when, for the first time in at least five years, demand fell below capacity.
Since then, allocation of cycles has steadily declined, with only 45 out of 72 cycles being fully allocated in 2019. In 2020, that number fell to 21. Between this sharp decline in demand and a record-breaking Atlantic hurricane season, Gulf production was severely hampered this year. Net production of finished motor gasoline fell to its second-lowest level on record in early April, with only 1.5mn b/d being produced. The only time production has been lower in the last 27 years, since the EIA began tracking the data, was in 2017 when Hurricane Harvey crippled the US Gulf coast production region.
Shipments of gasoline up the Explorer Pipeline into the US midcontinent also declined as road travel diminished sharply amid stay-at-home orders. The region received 21,677 b/d of finished gasoline from the Gulf coast from April through September this year, according to the EIA's most recent data. This was down by 50.7pc from the same six months in 2019, and it was the lowest stretch of shipments from the Gulf coast since late 2014.
Exports of gasoline out of the US Gulf coast declined similarly to reach an average of 621,000 b/d in the first nine months of this year, down by 12pc from the same period in 2019, EIA data show.
Related news posts
Colombia's electricity woes add to unrest against Petro
Colombia's electricity woes add to unrest against Petro
Bogota, 22 April (Argus) — Colombians took the streets of major cities and towns across the nation on Sunday to protest mainly against health, pension and labor changes, but potential power outages are also creating discontent. Authorities estimated that about 250,000 Colombians marched in widespread protests, sparked by changes in healthcare. Congress in April had rejected President Gustavo Petro's proposals in the sector, and the government the next day seized the two largest private-sector health insurers. Protesting healthcare workers say the government did this to implement changes through a back channel. "Regulatory noise and risk are likely to remain high amid announcements, proposals, and measures [that do not require congressional approval], aimed at changing the game's rules in strategic sectors," brokerage Credicorp Capital said. Colombians also protested being on the verge of electricity rationing like that in neighboring Ecuador as hydroelectric reservoirs remain at record-low levels. Several unions and other associations have long warned the Petro administration to take measures to offset the effects of the El Nino weather phenomenon. Electricity distributors last year called for allowing bills for energy purchased on the spot market to be deferred and for loosening price index rules, among other proposals. The national business council sent at least three letters to the president on the issue. At least nine separate letters calling for preparation to prevent blackouts were sent to the president and ministers. Several actions were only recently implemented . "There are no risk of electricity rationing in Colombia," former energy minister Irene Velez said in 2023. "We do not understand why some people are interested in generating panic." Government weather forecasts also overestimated rainfall expected for March, leading hydroelectric plants to use more water in the reservoirs than they otherwise would have, said director of the thermoelectric generation association (Andeg) Alejandro Castaneda. Reservoir levels stood at 29.5pc today, rising thanks to rains since 19 April, up from 28.75pc on 18 April. Electricity rationing is set to begin when reservoirs drop below 27pc, according to grid operator XM. By Diana Delgado Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
German products demand up on supply concerns
German products demand up on supply concerns
Hamburg, 22 April (Argus) — German demand for heating oil and fuels rose sharply in the past week, with consumer concerns that conflict in the Middle East could restrict product availability were coupled with falling domestic product prices. Spot trade of heating oil, diesel and E5 gasoline submitted to Argus reached their highest weekly averages since the start of the year. The last time this amount of heating oil was traded was in December last year, and for gasoline and diesel it was at the beginning of October. Gasoline demand surged particularly in the Emsland and South regions, and middle distillates were primarily traded in Rhine-Main and Southwest. The missile attack by Iran on Israel on 13 April and Israel's drone attack on Iran on 19 April have heightened concerns of further escalation. An open conflict between Iran and Israel could affect supply of crude and gasoil from the Middle East by threatening major shipping routes of the Suez Canal, the strait of Hormuz and the eastern Mediterranean. These concerns led some German consumers to fill their tanks. Concurrently, product prices have fallen across Germany, further stimulating demand. Refineries in Karlsruhe and Neustadt-Vohburg have drawn buyers with fuel oil and gasoline prices below the German average. Heating oil at Miro's 310,000 b/d Karlsruhe traded at more than €2/100l below the national average, while gasoline at Bayernoil's 216,000 b/d Neustadt-Vohburg traded at a discount of almost €6/100l to the same average. By Johannes Guhlke Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
TUI Cruises receives methanol-ready ship
TUI Cruises receives methanol-ready ship
New York, 18 April (Argus) — Cruise ship company TUI Cruises took delivery of a methanol-ready cruise ship which will start operations at the end of June. Methanol-ready vessels allow ship owners to easily retrofit their vessels to burning methanol in the future. The 7,900t deadweight Mein Schiff 7 will operate in the North Sea, the Baltic Sea, along the European Atlantic coast and in the Mediterranean and run on marine gasoil (MGO). It was built by Finland's Meyer Turku shipyard. In January, TUI Cruises signed a memorandum of understanding with trading company Mabanaft for future supply of green methanol. Mabanaft would cover TUI's methanol needs in northern Germany, and gradually add other European locations. Grey methanol was pegged at $717/t MGO equivalent and biomethanol at $2,279/t MGOe average from 1-18 April in Amsterdam-Rotterdam-Antwerp. About 0.9 times and 2.9 times, respectively, the price of MGO, Argus assessments showed. TUI Cruises is a joint venture between the German tourism company TUI AG and US-based cruise ship company Royal Caribbean. By Stefka Wechsler Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Germany delays HVO and B10 sales at fuel stations
Germany delays HVO and B10 sales at fuel stations
Hamburg, 18 April (Argus) — HVO and B10 will not be available for sale at German fuel stations until the end of April at the earliest, the environment ministry BMUV told Argus . The biodiesels were previously expected to be on sale from mid April, but the relevant amendment to the 10th Federal Immission Control Ordinance (BImSchV) still needs signatures from the heads of the three federal ministries involved — environment, transport and economics — and the German chancellor, after which it can be published in the Federal Law Gazette. The new regulations can come into force one day after publication. When this happens HVO100 and B10 diesel will be available for sale at German fuel stations. By Max Steinhau and Nik Pais dos Santos 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