US Department of Energy

Published at 16:57 3 Jul 2019 by . Last edited 11:18 22 Aug 2019.

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Extract from crude oil:

Oil crude stocks fell by 1.1 mb, less than the 2.9 mb draw usually seen during the week, as PADD 1 inventories built by 2.3 mb with Philadelphia Energy Solutions (PES) starting to shut down its Philadelphia refinery. This also resulted in US refinery runs falling w/w by 47 thousand b/d, even as PADD 2 runs rose by 0.17 mb/d, with USEC runs down by 0.14 mb/d w/w. A jump in imports by nearly 1 mb/d w/w and drop in exports to below 3 mb/d also tempered the draws.

PES has already started to resell North Sea and West African cargoes that it had bought. The refinery is one of the oldest in the US, commencing operations in 1959. Later combined with Girard Point, the PES complex became the largest on the USEC and a significant supplier of RBOB gasoline and ULSD in the region. On 21 June, the 25 thousand b/d alkylation unit at Girard Point exploded, sealing the fate of the long-troubled refinery. The USEC does not have pipeline access to cheap tight oil or oil sands feedstocks. But even before the renaissance in US tight oils a decade ago, the UESC’s refinery system was already on the brink when Sunoco’s 0.18 mb/d Marcus Hook and 0.15 mb/d Eagle Point refineries, Western’s 70 thousand b/d Yorktown plant and Hess’ 70 thousand b/d Port Reading FCC operation were all closed due to rapidly deteriorating refinery margins. Both the 0.19 mb/d Trainer refinery (incorporated into Delta Airlines in 2012 after conversion to a jet supply facility) and Philadelphia (sold to a private equity group) were saved from a brutal wave of refinery rationalisation. Following the closure of PES, USEC refining capacity will go down to 0.89 mb/d, with significant implications for crude markets.

Extract from oil products:

US gasoline stocks fell by 1.6 mb w/w as a 2.3 mb w/w decline in PADD 1 stocks offset less supportive developments elsewhere. PADD 1 inventories fell to 58.6 mb, 6.3 mb below the five-year average, as the effects of the PES shutdown began to be felt. Gasoline imports were also weak, at just over 0.45 mb/d into PADD 1. Given that PES was supplying 0.14 mb/d of gasoline (of which 45% would be RBOB specification) when operating at maximum rates, the loss of the plant will ensure that gasoline markets remain tight over the balance of the summer. Indeed, given the historical reluctance of long-haul suppliers of gasoline and high-octane blendstocks to send cargoes for delivery to the USEC towards the end of August and early September due to the timing of the switch to lower-priced winter gasoline, the end of the summer could prove to be particularly volatile for gasoline unless very high imports arrive over July and early August.

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