Disconnected US fuel markets drive imports despite RVO
Strong US environmental compliance costs have done little to curb refined product imports into the US in March and first-half April, as buyers in the US Atlantic coast became increasingly disconnected from producers in the Gulf coast.
The renewable volume obligation (RVO), a measurement of the cost of complying with US biofuels blending mandates, applies to importers of finished gasoline, including RBOB and CBOB, as well as diesel. High RVO traditionally boosts exports and deters imports, but with the arbitrage between the east coast and the Gulf closed, this pattern has been less clear despite historically strong RVO.
This trend was exaggerated over the past two months when a severe winter storm in mid-February devastated US crude processing and limited fuel availability across the Gulf coast. But even before the storm and the lengthy recovery, the structurally short Atlantic coast markets have been more readily supplied by imports from Europe, Canada, even sellers from Brazil and Colombia.
The increasing reliance on imports mirrored the decline in Colonial pipeline shipments from the Gulf coast. The Gulf coast market, supported by exports to Latin America, constantly fetched prices too high to make arbitrage shipments to New York Harbor economically viable.
This became exacerbated in late March, when the pipeline company said it had no diesel inputs from Houston after low shipment volumes caused delays earlier in the month.
These delays persisted into April, which was especially problematic for gasoline shippers trying to balance supply in the middle of the gasoline transition season. Winter-grade gasoline shipments from the Gulf coast in March are arriving several weeks late in New York Harbor, where demand has mostly moved to the summer grade. Batches of winter-grade high RVP gasoline arriving in Linden, New Jersey, struggled to find buyers, and had to be sold off by the pipeline company in seven auctions over the past two weeks.
Meanwhile, New York Harbor has attracted a surge of imports from Europe and Brazil, where rising Covid-19 cases are capping demand just as vaccination rates rise in the US.
This dynamic has taken precedence over the RVO's impact on trade flows in and out of the US, but particularly for imports.
US imports grow
The RVO has averaged about $6.65/bl through March and first-half April, including some of the highest levels on record. But it has failed to stop March imports from rising to multi-year highs.
The four-week average of gasoline and ultra-low sulphur distillates imports into the US at 1.14mn b/d in March and 1.39mn b/d in the two weeks ended 9 April, highs not seen since May 2019, data from the US Energy Information Administration (EIA) show. In particular, the 1.43mn b/d imported during the week ended 2 April was the high four-week average since February 2010.
Vortexa estimates also show US waterborne gasoline and diesel imports hit 1.23mn b/d in March, the highest level since at least April 2018. April imports so far tallied 960,000 b/d, the highest level since August 2019.
Most of these imports went to markets along the east coast, including New England, New York Harbor and Florida.
Meanwhile the country's gasoline and diesel exports have below the five-year averages in March and first-half April. This is partly because storm-induced price spikes in late February and March led to [narrow arbitrages](https://direct.argusmedia.com/newsandanalysis/article/2195745) out of the US.
RVO's diminished impact on imports and exports could also have resulted from evolving pricing mechanisms. The cost of RVO is increasingly being added into imports and discounted from exports, which creates a net zero effect for producers selling into, or suppliers sourcing from, the domestic or foreign markets.
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HSFO demand supports Rotterdam 1Q bunker sales
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G7 countries put timeframe on 'unabated' coal phase-out
G7 countries put timeframe on 'unabated' coal phase-out
London, 30 April (Argus) — G7 countries today committed to phasing out "unabated coal power generation" by 2035 — putting a timeframe on a coal phase-out for the first time. The communique, from a meeting of G7 climate, energy and environment ministers in Turin, northern Italy, represents "an historic agreement" on coal, Canadian environment minister Steven Guilbeault said. Although most G7 nations have set a deadline for phasing out coal-fired power, the agreement marks a step forward for Japan in particular, which had previously not made the commitment, and is a "milestone moment", senior policy advisor at think-tank E3G Katrine Petersen said. The G7 countries are Italy — this year's host — Canada, France, Germany, Japan, the UK and the US. The EU is a non-enumerated member. But the pledge contains a caveat in its reference to "unabated" coal-fired power — suggesting that abatement technologies such as carbon capture and storage could justify its use, while some of the wording around a deadline is less clear. The communique sets a timeframe of "the first half of [the] 2030s or in a timeline consistent with keeping a limit of 1.5°C temperature rise within reach, in line with countries' net-zero pathways". OECD countries should end coal use by 2030 and the rest of the world by 2040, in order to align with the global warming limit of 1.5°C above pre-industrial levels set out in the Paris Agreement, according to research institute Climate Analytics. The countries welcomed the outcomes of the UN Cop 28 climate summit , pledging to "accelerate the phase out of unabated fossil fuels so as to achieve net zero in energy systems by 2050". It backed the Cop 28 goal to triple renewable energy capacity by 2030 and added support for a global target for energy storage in the power sector of 1.5TW by 2030. The group committed to submit climate plans — known as nationally determined contributions (NDCs) — with "the highest possible ambition" from late this year or in early 2025. And it also called on the IEA to "provide recommendations" next year on how to implement a transition away from fossil fuels. The G7 also reiterated its commitment to a "fully or predominantly decarbonised power sector by 2035" — first made in May 2022 and highlighted roles for carbon management, carbon markets, hydrogen and biofuels. Simon Stiell, head of UN climate body the UNFCCC, urged the G7 and G20 countries to lead on climate action, in a recent speech . The group noted in today's outcome that "further actions from all countries, especially major economies, are required". The communique broadly reaffirmed existing positions on climate finance, although any concrete steps are not likely to be taken ahead of Cop 29 in November. The group underlined its pledge to end "inefficient fossil fuel subsidies" by 2025 or earlier, but added a new promise to "promote a common definition" of the term, which is likely to increase countries' accountability. The group will report on its progress towards ending those subsidies next year, it added. Fostering energy security The communique placed a strong focus on the need for "diverse, resilient, and responsible energy technology supply chains, including manufacturing and critical minerals". It noted the important of "guarding against possible weaponisation of economic dependencies on critical minerals and critical raw materials" — many of which are mined and processed outside the G7 group. Energy security held sway on the group's take on natural gas. It reiterated its stance that gas investments "can be appropriate… if implemented in a manner consistent with our climate objectives" and noted that increased LNG deliveries could play a key role. By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Estoques de etanol no Centro-Sul recuam em abril
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Pemex fuel output surges, imports down in March
Pemex fuel output surges, imports down in March
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