Viewpoint: Gasoline to surprise again in 2022 on upside

  • : Oil products
  • 22/01/04

European road fuel demand should bounce back further in 2022 as the effects of the pandemic on mobility recede, and permanent structural shifts in production and tight inventories going into the spring could all combine to produce a bumper year.

Gasoline outperformed in 2021 as road fuel demand returned or exceeded pre-Covid levels earlier than expected, and it benefited from the shift to private vehicles over public transport when cases flared up again. Pump prices reached record highs in Europe and the US in the autumn and, in a boon for producers, so did cracks. Eurobob oxy gasoline's notional premium to North Sea Dated averaged $9.45/bl in 2021, the widest since 2017.

For the first time ever, gasoline outperformed other transport fuels — averaging a $1.07/bl premium to diesel and $2.91/bl above jet fuel in 2021.

A prompt supply crunch caused by a lack of available barges in the Amsterdam-Rotterdam-Antwerp (ARA) trading hub explains the sharp surge in gasoline prices and cracks in autumn 2021, and is emblematic of issues caused by global supply chain constrictions and high energy costs. Barge freight rates in ARA rose more than four-fold in the year, and the cost of running a refinery increased exponentially after natural gas prices hit record highs.

That means supply will remain constrained into this year, in addition to near 900,000 b/d of crude distillation capacity permanently closed or earmarked for closure since the start of the pandemic.

At the same time demand should continue its solid recovery. Gasoline consumption exceeded pre-Covid levels in many European countries in summer 2021, with international travel still restricted. "When Covid cases rose sharply again, gasoline demand benefited from the preference of personal vehicles over public transport.

Firm export demand was a significant price driver, and will play a major role again in 2022. Europe's position as primary supplier of gasoline to west Africa is under no threat, and a record 16.7mn t went to the region between January and November 2021, up by 36pc from the first 11 months of 2019. Around 16mn t of European gasoline went to the US in the same time, up by 13pc from 2019.

US supply should remain tight into 2022 for similar reasons as Europe. Around 1mn b/d of US refining capacity has been closed due to Covid-19, while gasoline demand returned to pre-Covid levels as early as May and set new records through the summer including breaching 10mn b/d for the first time ever.

Demand in the US, the world's largest gasoline market, shows no sign of slowing, and that has helped trim inventories to multi-year lows. Most recent EIA stock data show a deficit of 9pc on two years ago on the US Atlantic coast— where most European exports end up — having fallen to seven-year lows in November.

Lower overall output leaves the US vulnerable to supply shocks, such as last year's arctic storm or another hurricane in the US Gulf coast.

Supply is also relatively tight in Asia-Pacific, and although eastbound flows will remain on the periphery for European suppliers, a shortfall of supply from China means more demand for European gasoline from its regular markets. The pandemic slowed the rapid capacity expansion of the last decade in the Mideast Gulf and China, with the latter expected to keep exports tight into 2022 because of lower domestic runs and sharply reduced quotas.

Further ahead, the energy transition will play a major role in trimming traditional road fuel demand. For the first time, new battery or hybrid-battery cars outsold fossil fuel engines in 2021, but "peak road fuel demand" is some way off. The roll out of E10 gasoline in the UK will probably be repeated in Ireland in 2022, which may tip the balance in favour of non-oxy Eurobob as the fuel of choice for blending more bioethanol.

Eurobob oxy gasoline's premium to North Sea Dated

European product cracks to North Sea Dated

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24/04/26

High inventories pressure Brazil biodiesel prices

High inventories pressure Brazil biodiesel prices

Sao Paulo, 26 April (Argus) — Logistical differentials for Brazilian biodiesel contracts to supply fuel distributors in May and June fell from March and April values, reflecting higher inventories and a bumper crop of soybeans for crushing, which could increase vegetable oil production. The formula for the logistics differential of plants includes the quote of the soybean oil futures contract in Chicago, its differential for export cargoes in the port of Paranagua and the Brazilian real-US dollar exchange rate. It is the portion in the pricing linked to producers' margin. Negotiations for May and June started with plants seeking higher values to recover part of the losses incurred by unscheduled stops , the result of retailers' delays in collecting biodiesel. But the supply glut has not abated, leading to a drop in prices. With higher inventories in the market, fuel distributors stuck close to acquisition goals established by oil regulator ANP for the May-June period. Sales are expected to gain traction over the next two months, as blended diesel demand traditionally gets a seasonal boost from agricultural-sector consumption linked to grain and sugarcane crops. The distribution sector expects an extension of the current supply-demand imbalance, exacerbated by significant volumes of imported diesel at ports and lower-than-expected demand. The situation has generated concern among many participants, who see this trend as a potential sign of non-compliance with the biodiesel blending mandate. ANP data show that the compliance rate with the Brazilian B14 diesel specification dropped to 83.4pc in April from 95.2pc in March, reaching the lowest level since the 2016 start of monitoring. Non-compliance with the minimum biodiesel content accounted for 67pc of the infractions recorded during the period compared to a historical average rate of 47pc. The recent end to a special tax regime for fuel importing companies offered by northern Amapa state's secretary of finance should end a significant source of diesel price distortions and help rebalance supply in the country. Variations The steepest decline in differentials took place in northeastern Bahia state, where premiums for the period ranged from R600-830/m³ (44.35-61.35¢/USG), down from R730-1,020/m³ in the March-April period, according to a recent Argus survey. In the northern microregion of Goias-Tocantins states, the premium range also dropped by around R142/m³ to R300-535/m³ from R440-680/m³. By Alexandre Melo Brazil biodiesel plant differentials R/m³ May/June March/April ± Low High Low High Rio Grande do Sul 110 380 280 450 -120 Sorriso-Nova Mutum 50 340 220 350 -90 Cuiaba-Rondonopolis 80 405 280 450 -123 Northern of Goiás-Tocantins 300 535 440 680 -142 Southern of Goias 350 500 450 650 -125 Parana-Santa Catarina 150 450 400 480 -140 Bahia 600 830 730 1,120 -210 Source: Argus survey Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Lyondell Houston refinery to run at 95pc in 2Q


24/04/26
24/04/26

Lyondell Houston refinery to run at 95pc in 2Q

Houston, 26 April (Argus) — LyondellBasell plans to run its 264,000 b/d Houston, Texas, refinery at average utilization rates of 95pc in the second quarter and may convert its hydrotreaters to petrochemical production when the plant shuts down in early 2025. The company's sole crude refinery ran at an average 79pc utilization rate in the first quarter due to planned maintenance on a coking unit , the company said in earnings released today . "We are evaluating options for the potential reuse of the hydrotreaters at our Houston refinery to purify recycled and renewable cracker feedstocks," chief executive Peter Vanacker said on a conference call today discussing earnings. Lyondell said last year a conversion would feed the company's two 930,000 metric tonnes (t)/yr steam crackers at its Channelview petrochemicals complex. The company today said it plans to make a final investment decision on the conversion in 2025. Hydrotreater conversions — such as one Chevron completed last year at its 269,000 b/d El Segundo, California, refinery — allow the unit to produce renewable diesel, which creates renewable naphtha as a byproduct. Renewable naphtha can be used as a gasoline blending component, steam cracker feed or feed for hydrogen producing units, according to engineering firm Topsoe. Lyondell last year said the Houston refinery will continue to run until early 2025, delaying a previously announced plan to stop crude processing by the end of 2023. By Nathan Risser Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

EU adopts Net-Zero Industry Act


24/04/26
24/04/26

EU adopts Net-Zero Industry Act

London, 26 April (Argus) — Members of the European Parliament (MEPs) have adopted Net-Zero Industry Act, which plans to allocate funds towards the production of net-zero technologies. The act provides a pathway to scale up development and production of technologies that are critical towards meeting the EU's recommendation of net-zero greenhouse gas (GHG) emissions by 2050. This would include solar panels, electrolysers and fuel cells, batteries, heat pumps, onshore and offshore wind turbines, grid technologies, sustainable biomethane, as well as carbon capture and storage (CCS). The act is designed to help simplify the regulatory framework for the manufacture of these technologies in order to incentivise European production and supply. It also sets a target of 40pc production within the EU for its annual "deployment needs" of these technologies by 2030. Time limits will be instated on permit grants for manufacturing projects, at 12 months if the manufacturing capacity is under 1 GW/yr and 18 months for those above that. It will introduce time limits of nine months for "net-zero strategic projects" of less than 1 GW/yr and 12 months for those above. This is further complemented by the introduction of net-zero strategic projects for CO2 storage, to help support the development of CCS technology. The act was met with positive reactions from the European Community Shipowners' Association (ECSA), which said the bill will set the benchmark for member states to match 40pc of the deployment needs for clean fuels for shipping with production capacity. ECSA said the Net-Zero Industry Act will be instrumental in supporting the shipping industry to meet targets set under FuelEU Maritime regulations , which are set to come into effect next year. By Hussein Al-Khalisy Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

New technologies aim to boost SAF production


24/04/26
24/04/26

New technologies aim to boost SAF production

London, 26 April (Argus) — A likely rise in global demand for sustainable aviation fuel (SAF), underpinned by mandates for its use, is encouraging development of new production pathways. While hydrotreated esters and fatty acids synthesised paraffinic kerosine (HEFA-SPK) remains the most common type of SAF available today, much more production will be needed. The International Air Transport Association (Iata) estimated SAF output at around 500,000t in 2023, and expects this to rise to 1.5mn t this year, but that only meets around 0.5pc of global jet fuel demand. An EU-wide SAF mandate will come into effect in 2025 that will set a minimum target of 2pc, with a sub-target for synthetic SAF starting from 2030. This week the UK published its domestic SAF mandate , also targeting a 2pc SAF share in 2025 and introducing a power-to-liquid (PtL) obligation from 2028. New pathways involve different technology to unlock use of a wider feedstock base. US engineering company Honeywell said this week its hydrocracking technology, Fischer-Tropsch (FT) Unicracking, can be used to produce SAF from biomass such as crop residue or wood and food waste. Renewable fuels producer DG Fuels will use the technology for its SAF facility in Louisiana, US. The plant will be able to produce 13,000 b/d of SAF starting from 2028, Honeywell said. The company said its SAF technologies — which include ethanol-to-jet , which converts cellulosic ethanol into SAF — have been adopted at more than 50 sites worldwide including Brazil and China. Honeywell is part of the Google and Boeing-backed United Airlines Ventures Sustainable Flight Fund , which is aimed at scaling up SAF production. German alternative fuels company Ineratec said this week it will use South African integrated energy firm Sasol's FT catalysts for SAF production. The catalysts will be used in Ineratec's plants, including a PtL facility it is building in Frankfurt, Germany. The plant will be able to produce e-fuels from green hydrogen and CO2, with a capacity of 2,500 t/yr of e-fuels beginning in 2024. The e-fuels will then be processed into synthetic SAF. Earlier this month , ethanol-to-jet producer LanzaJet said it has received funding from technology giant Microsoft's Climate Innovation Fund, "to continue building its capability and capacity to deploy its sustainable fuels process technology globally". The producer recently signed a licence and engineering agreement with sustainable fuels company Jet Zero Australia to progress development of an SAF plant in north Queensland, Australia. The plant will have capacity of 102mn l/yr of SAF. Polish oil firm Orlen formed a partnership with Japanese electrical engineering company Yakogawa to develop SAF technology . They aim to develop a technological process to synthesise CO2 and hydrogen to form PtL SAF. The SAF will be produced from renewable hydrogen as defined by the recast EU Renewable Energy Directive (RED II) and bio-CO2 from biomass boilers, Orlen told Argus . By Evelina Lungu Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

P66 to sell German, Austrian retail business: Update


24/04/26
24/04/26

P66 to sell German, Austrian retail business: Update

Adds number of Phillips 66-owned gas stations in Germany and Austria, company response. Houston, 26 April (Argus) — US refiner Phillips 66 plans to sell its gas station business in Germany and Austria as part of a broader plan to divest non-core assets, the company said in earnings released today. The company sells to retail and wholesale customers under the JET gas station brand across 1,270 sites in Austria, Germany and the UK, according to the refiner's 2022 annual review. JET operated 813 gas station in Germany as of June 2023, according to the country's federal association of independent petrol stations and 154 sites in Austria according to the company website. Phillips 66 has a further 330 gas stations in Switzerland through a joint venture under the Coop brand, but those are not included in the sales effort. The refiner declined to provide details of the current number of sites for sale in Germany and Austria. Phillips 66 has undertaken multi-year cost-cutting projects and said this year it is considering selling some of its midstream assets to satisfy a planned $3bn in divestments. Late last year hedge fund Elliott Investment Management purchased a $1bn stake in the company, calling on it to refocus on its refining business and reduce operating costs. In Elliott's December activist letter to the refiner, the hedge fund said if Phillips 66 failed to make sufficient progress towards its cost-cutting goals, it would push for management changes and a sale of the company's stake in Chevron Phillips Chemicals (CPChem) — valued at about $15bn-20bn after taxes by the investor — and its European convenience stores and other non-operated midstream assets. Elliott previously targeted Canadian integrated Suncor, pushing for board changes and divestment of its 1,500 retail stores, which ultimately it did not sell. US refiner Marathon, however, agreed to sell its 3,900-store Speedway retail network in 2019 following pressure from Elliott, which had criticised its integrated downstream business model. By Nathan Risser Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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