Extract from crude oil:
The Plains All American Sunrise expansion remains a hot topic. Debottlenecking Wichita Falls will allow more flow on the Basin pipeline into Cushing and will also indirectly back more barrels into the hub as refiners pull less out of lines that either feed into or draw from the hub, resulting in a net inflow increase of at least 0.22 mb/d. While this view is consistent in the market, the likely discrepancy is exactly how much impact will Sunrise have on Cushing balances immediately following the start-up of the line. Linefill is slated to be completed by end-October, thus operations are not expected to start until November. We estimate the line would initially flow at 50 thousand b/d into Cushing in November and then flow at 0.12 mb/d in December, and flow at least 0.22 mb/d in January. This is because Plains announced that the line will start by using generators for power at the pump stations, which will cap the initial flow rates in our view before full operations in January. Hence, the initial impact on Cushing balances (in Q4 18) will be more muted than some expected. Indeed, October WTI-Midland differentials do not suggest significant incremental movement out of the basin over the next few months. November and December WTI-Midland is trading at discounts of $11.50 and $9.80 vs current discounts of $14.50, suggesting some incremental takeaway capacity, but not likely at the levels that WTI timespreads are suggesting. One caveat here is that Plains has filed for a new tariff from September with the Texas Rail Road Commission, suggesting that line fill could be sooner than anticipated. However, we maintain our view that linefill will take place in October, as hydrotesting is still scheduled for this month, leaving little to no time for nominations.
Extract from oil products:
US gasoline stocks increased by 1.25 mb w/w to 236 mb, led by a 0.67 mb w/w increase in PADD 1 stocks to 66.8 mb. PADD 1 appears to be well supplied, with potentially three gasoline cargoes from Saudi Arabia heading to New York Harbor and scheduled to arrive by mid-September. But FCC outages are high. Port Arthur (Motiva) and Delaware City both reported unplanned FCC outages while Bayway continues to struggle with its FCC unit. Bayway’s FCC is now scheduled to return around 30 September, having gone offline on 10 August. Elsewhere, evacuations are underway as North and South Carolina brace for Hurricane Florence. Some fuel outages have been reported in rural areas, but most retail locations have remained well supplied. This surge in clean product demand is to be expected with emergency supplies being accumulated in addition to demand needed for the evacuations and we anticipate no major disruption to demand in the longer term. The Carolinas account for 5.3% of US gasoline demand.