Tom Nolan + 2,441 TN October 20, 2022 Forget Oil, The Real Crisis Is Diesel Inventories: The US Has Just 25 Days Left by Tyler Durden Wednesday, Oct 19, 2022 - 09:05 PM For all the drama surrounding Biden's latest Strategic Petroleum Reserve fiasco and his admin's ridiculous idea to "stimulate" US energy producers to pump more oil because, you see, Biden promises to buy oil at some unknown point in the future (he may or may not, but right now he is certainly draining a million barrels of emergency US energy lifeblood just to buy a few midterm votes, assuring energy producers have zero incentive to produce more), the real crisis is not oil or gas, but diesel. The problem is that as we repeatedly warned over the summer, even as others were transfixed by the moves in gas, see: Sorry, Diesel Prices Are Likely To Climb Again Soon (Aug 4) Can The Global Gasoline And Diesel Crisis Be Solved? (June 21) D-Day Approaches: Crack Spread Soars As Diesel Market Braces For Historic Shock (May 3) The Diesel Market Is Soaring, And Gasoline Prices Will Catch Up This Summer (May 1) Global Diesel Shortage To Push Oil Prices Much Higher (March 25) "Gas Stations Will Run Dry": Catastrophic Scenario For Diesel Emerging (March 23) Global Diesel Shortage Raises Risk Of Even Greater Oil Price Spike (Mar 12) China Asks State-Owned Refiners To Halt Gasoline, Diesel Exports (Mar 10) U.S. Diesel Stocks Set To Fall Critically Low (Feb 18) Diesel Is The U.S. Economy's Inflation Canary (Feb 😎 ... the crisis gripping the US diesel market is getting out of hand, as demand is surging while supplies remain at the lowest seasonal level for this time of year ever, according to government data released Wednesday. According to the EIA, the US now has just 25 days of diesel supply, the lowest since 2008; and while inventories are record low, the four-week rolling average of distillates supplied - a proxy for demand - rose to its highest seasonal level since 2007. In short, record low supply (courtesy of stifling regulations that have led to a historic shortage of refining capacity) meet record high demand. What comes next is, well, ugly (while weekly demand dipped slightly in the latest week, it’s still at highest point in two years amid higher trucking, farming and heating use). The shortage of the fuel used for heating and trucking and - generally speaking - to keep commerce and freight running, has become a key worry for the Biden administration heading into winter, perhaps even bigger than the price of gas heading into the midterms (well, not really). As Bloomberg's Javier Blas writes, "such low levels are alarming because diesel is the workhorse of the global economy. It powers trucks and vans, excavators, freight trains and ships. A shortage would mean higher costs for everything from trucking to farming to construction." National Economic Council Director Brian Deese told Bloomberg TV Wednesday that that diesel inventories are “unacceptably low” and “all options are on the table” to build supplies and reduce retail prices. But while the White House claims to be so very concerned about the coming diesel crisis, it is doing absolutely nothing besides draining the SPR which has zero impact on diesel production. The historic diesel crunch comes just weeks ahead of the midterm elections and will almost certainly drive up prices for consumers who already view inflation and the economy as a top voting issue. Retail prices have been steadily climbing for more than two weeks. At $5.324 a gallon, they’re 50% higher than this time last year, according to AAA data. Wholesale diesel prices in the spot market of New York harbor, a key pricing point, have surged this week to more than $200 per barrel. Excluding a brief interval from late April into mid-May, that would be a record high. As a result, American refiners are enjoying the best-ever diesel margins, with the profit of turning a barrel of crude into one of diesel - i.e., the diesel crack spread - hitting a record high of $86.5 per barrel, up roughly 450% from the 2000-2020 average of $15.7 per barrel. This isn’t all that surprising. as we have been warning all year, the American diesel market has been in crisis mode for most of 2022; if only others had caught on this crisis may have been averted. But now, it's too late, and national stockpiles have drained as refiners entered maintenance season and as Russia’s war in Ukraine tightened global supplies and limited imports. Meanwhile, market backwardation - where prompt deliveries are priced at a premium over future deliveries - has made building inventory extremely costly, feeding into a vicious cycle of tight supplies and price spikes. In New England, where more people burn fuel for heating than anywhere else in the country, stockpiles are less than a third of typical levels for this time of year. The reasons for the collapse in inventories and the price surge are four-fold. First, local diesel demand has recovered quicker than gasoline and jet-fuel from the impact of the pandemic, draining stocks. Second, foreign demand is also strong, with American diesel exports running at unusually high level. Third, and according to many, most important of all, the US also has lower refining capacity than before, reducing its capacity to make fuels. Fourth is Russia’s invasion of Ukraine. The US was importing a significant amount of Russian fuel oil before the war, which its Gulf of Mexico-based refiners turned into diesel. The trade ended after the White House sanctioned Russian petroleum exports. Some relief is on the way, courtesy of those handful of international sources of commodities that the Biden admin hasn't declared an implicit war on. At least two vessels carrying around 1 million barrels of diesel are due to arrive in New York after being diverted from their original destinations in Europe. Delta's Trainer refinery in Pennsylvania is also returning from seasonal maintenance, which will increase regional diesel production. But the impact of such band aids will be tiny. As Bloomberg's Blas writes, "the diesel crisis leaves the Biden administration facing very difficult choices. If he leaves the market alone, prices are likely to rise further before they drop; if he intervenes, either setting up minimum inventory levels or restricting exports, price increases will likely be felt elsewhere into the world. Either route will have big implications for inflation at home and for energy security in Latin America and Europe." In a testament to just how clueless the Biden admin is, last spring wholesale diesel prices surged to all-time high as inventories plunged in April and May, pushing retail prices to a record high. At the time, this website (and many others) warned that we have to take urgent steps now to avoid a crisis... and nobody moved a finger; jaw bones on the other hand never stopped. Well, fast forward to now when a new crisis is in the making. America typically uses the low-demand seasons of spring and summer to rebuild its stocks of distillate fuels ahead of the winter. But it failed to do so this year - something even Europe avoided by stockpiling nat gas knowing it faces a freezing winter otherwise - and stocks are now nearly as low as they were in April, at the end of the last heating season. If inventories decline between October and April by their 20-year average of about 25 million barrels, the US will emerge from winter with a little more than 80 million barrels in stock. That, according to Blas, is an unlikely scenario, however: The oil market would try to keep inventories from falling that much, with prices rising high enough to slow the economy, curtailing demand. Over the last 40 years, American diesel inventories have never dropped below 85 million barrels, even at the end of the heating season. So now that the genie is out the bottle, here are the choices the Biden admin faces, all of them unpalatable: The White House can let the market continue doing its job, with surging prices likely denting consumption and boosting supply. With refineries enjoying sky-high margins, more diesel should be coming. But the cost of the laissez-faire approach is higher inflation and a much faster recession as US industries shut down. Because diesel increases trucking costs, it’s a particularly pernicious sort of inflation as it quickly embeds into everything that needs to be transported, lifting core inflation measures. If the White House opts to intervene, the less harmful measure would be to release a small reserve of diesel that the government keeps for emergencies (clearly they have no problem doing that). The Northeast Home Heating Oil Reserve only has one million barrels, so it would be, at best, a Band-Aid. But it’s better than nothing, and Biden should order its release. For those asking, releasing more crude from the Strategic Petroleum Reserve would do little to resolve the problem, since the bottleneck is refining. Other interventions would have significant consequences, potentially harming American allies. In Washington, officials are mulling restricting, or even banning, diesel exports. If the measure is approved, it would leave neighbors including Mexico, Brazil and Chile short of diesel. In July, the last month with available full data, US diesel exports to Latin America hit a record high of 1.2 million barrels, double the amount a decade ago. Another option is forcing oil companies to build up stocks quickly ahead of the winter by setting a minimum inventory level, similar to what the European Union did for natural gas stockpiles. US officials are particularly worried about the northern part of the US East Coast, where inventories are low both seasonally and in absolute terms. The region, known in the industry’s jargon as PADD1A, is where the greatest demand is: Of the roughly 5.3 million households that use heating oil in America, more than 80% are in the Northeast. The problem with a mandatory minimum stock level is that it would force American refiners to import more or reduce their exports — or both. The impact in Latin America would be noticeable. Prices in the US may decline, but they will soar elsewhere. The bottom line, as the Bloomberg energy strategist notes, is that "the timing of today’s diesel crisis couldn’t be worse." That's because the EU, which relies still on Russian diesel exports, will ban imports from February onward (assuming it survives the winter). Europe will be short of diesel then, and Biden needs to consider that too. Ultimately, the imminent arrival of the bone-crushing recession will rebalance the market, reducing demand, particularly as the housing market cools and construction slows down, and consumer demand for goods declines, reducing trucking needs. That’s a heavy price to pay to resolve the problem, but with an administration as hopelessly clueless as this one, which today blasted the following tweet to make a point yet proved just the opposite... TWITTER PRESIDENT BIDEN https://twitter.com/POTUS/status/1582774996774326272 https://www.zerohedge.com/markets/forget-oil-real-crisis-diesel-inventories-us-has-just-25-days-left 1 Quote Share this post Link to post Share on other sites
Boat + 1,315 RG October 20, 2022 Over 1 million barrels of diesel is exported every day. Tom is worried. Lol. 1 Quote Share this post Link to post Share on other sites
footeab@yahoo.com + 2,129 October 20, 2022 1 hour ago, Boat said: Over 1 million barrels of diesel is exported every day. Tom is worried. Lol. Damn, I think this is the 2nd post of yours I have ever upvoted... Quote Share this post Link to post Share on other sites
Tom Nolan + 2,441 TN October 20, 2022 I guess folks are not keeping with the higher diesel prices in the marketplace. This is where cost of production and cost of transporting goods are tied to consumer inflation. We can expect longterm economic consequences if diesel stays in a higher relative range and/or goes higher. Quote Share this post Link to post Share on other sites
Tom Nolan + 2,441 TN October 20, 2022 At OILPRICE.com with Headline... https://oilprice.com/Energy/Energy-General/How-The-Diesel-Crisis-Became-An-Inflationary-Time-Bomb.html How The Diesel Crisis Became An Inflationary Time Bomb By ZeroHedge - Oct 20, 2022, 3:00 PM CDT Diesel inventories have fallen to dangerously low levels. U.S. refineries are churning out less diesel and exporting more amidst a period of high demand. An ongoing diesel shortage would lead to higher trucking, farming and construction costs. Join Our Community For all the drama surrounding Biden's latest Strategic Petroleum Reserve fiasco and his admin's ridiculous idea to "stimulate" US energy producers to pump more oil because, you see, Biden promises to buy oil at some unknown point in the future (he may or may not, but right now he is certainly draining a million barrels of emergency US energy lifeblood just to buy a few midterm votes, assuring energy producers have zero incentive to produce more), the real crisis is not oil or gas, but diesel. The problem is that as we repeatedly warned over the summer, even as others were transfixed by the moves in gas, see: Sorry, Diesel Prices Are Likely To Climb Again Soon (Aug 4) Can The Global Gasoline And Diesel Crisis Be Solved? (June 21) D-Day Approaches: Crack Spread Soars As Diesel Market Braces For Historic Shock (May 3) The Diesel Market Is Soaring, And Gasoline Prices Will Catch Up This Summer (May 1) Global Diesel Shortage To Push Oil Prices Much Higher (March 25) "Gas Stations Will Run Dry": Catastrophic Scenario For Diesel Emerging (March 23) Global Diesel Shortage Raises Risk Of Even Greater Oil Price Spike (Mar 12) China Asks State-Owned Refiners To Halt Gasoline, Diesel Exports (Mar 10) U.S. Diesel Stocks Set To Fall Critically Low (Feb 18) Diesel Is The U.S. Economy's Inflation Canary (Feb 😎 ... the crisis gripping the US diesel market is getting out of hand, as demand is surging while supplies remain at the lowest seasonal level for this time of year ever, according to government data released Wednesday. According to the EIA, the US now has just 25 days of diesel supply, the lowest since 2008; and while inventories are record low, the four-week rolling average of distillates supplied - a proxy for demand - rose to its highest seasonal level since 2007. In short, record low supply (courtesy of stifling regulations that have led to a historic shortage of refining capacity) meet record high demand. What comes next is, well, ugly (while weekly demand dipped slightly in the latest week, it’s still at highest point in two years amid higher trucking, farming and heating use). The shortage of the fuel used for heating and trucking and - generally speaking - to keep commerce and freight running, has become a key worry for the Biden administration heading into winter, perhaps even bigger than the price of gas heading into the midterms (well, not really). As Bloomberg's Javier Blas writes, "such low levels are alarming because diesel is the workhorse of the global economy. It powers trucks and vans, excavators, freight trains and ships. A shortage would mean higher costs for everything from trucking to farming to construction." Related: Private Investors Are Flocking Into Oil And Gas National Economic Council Director Brian Deese told Bloomberg TV Wednesday that that diesel inventories are “unacceptably low” and “all options are on the table” to build supplies and reduce retail prices. But while the White House claims to be so very concerned about the coming diesel crisis, it is doing absolutely nothing besides draining the SPR which has zero impact on diesel production. The historic diesel crunch comes just weeks ahead of the midterm elections and will almost certainly drive up prices for consumers who already view inflation and the economy as a top voting issue. Retail prices have been steadily climbing for more than two weeks. At $5.324 a gallon, they’re 50% higher than this time last year, according to AAA data. Wholesale diesel prices in the spot market of New York harbor, a key pricing point, have surged this week to more than $200 per barrel. Excluding a brief interval from late April into mid-May, that would be a record high. As a result, American refiners are enjoying the best-ever diesel margins, with the profit of turning a barrel of crude into one of diesel - i.e., the diesel crack spread - hitting a record high of $86.5 per barrel, up roughly 450% from the 2000-2020 average of $15.7 per barrel. This isn’t all that surprising. as we have been warning all year, the American diesel market has been in crisis mode for most of 2022; if only others had caught on this crisis may have been averted. But now, it's too late, and national stockpiles have drained as refiners entered maintenance season and as Russia’s war in Ukraine tightened global supplies and limited imports. Meanwhile, market backwardation - where prompt deliveries are priced at a premium over future deliveries - has made building inventory extremely costly, feeding into a vicious cycle of tight supplies and price spikes. In New England, where more people burn fuel for heating than anywhere else in the country, stockpiles are less than a third of typical levels for this time of year. The reasons for the collapse in inventories and the price surge are four-fold. First, local diesel demand has recovered quicker than gasoline and jet-fuel from the impact of the pandemic, draining stocks. Second, foreign demand is also strong, with American diesel exports running at unusually high level. Third, and according to many, most important of all, the US also has lower refining capacity than before, reducing its capacity to make fuels. Fourth is Russia’s invasion of Ukraine. The US was importing a significant amount of Russian fuel oil before the war, which its Gulf of Mexico-based refiners turned into diesel. The trade ended after the White House sanctioned Russian petroleum exports. Some relief is on the way, courtesy of those handful of international sources of commodities that the Biden admin hasn't declared an implicit war on. At least two vessels carrying around 1 million barrels of diesel are due to arrive in New York after being diverted from their original destinations in Europe. Delta's Trainer refinery in Pennsylvania is also returning from seasonal maintenance, which will increase regional diesel production. But the impact of such band aids will be tiny. As Bloomberg's Blas writes, "the diesel crisis leaves the Biden administration facing very difficult choices. If he leaves the market alone, prices are likely to rise further before they drop; if he intervenes, either setting up minimum inventory levels or restricting exports, price increases will likely be felt elsewhere into the world. Either route will have big implications for inflation at home and for energy security in Latin America and Europe." In a testament to just how clueless the Biden admin is, last spring wholesale diesel prices surged to all-time high as inventories plunged in April and May, pushing retail prices to a record high. At the time, this website (and many others) warned that we have to take urgent steps now to avoid a crisis... and nobody moved a finger; jaw bones on the other hand never stopped. Well, fast forward to now when a new crisis is in the making. America typically uses the low-demand seasons of spring and summer to rebuild its stocks of distillate fuels ahead of the winter. But it failed to do so this year - something even Europe avoided by stockpiling nat gas knowing it faces a freezing winter otherwise - and stocks are now nearly as low as they were in April, at the end of the last heating season. If inventories decline between October and April by their 20-year average of about 25 million barrels, the US will emerge from winter with a little more than 80 million barrels in stock. That, according to Blas, is an unlikely scenario, however: The oil market would try to keep inventories from falling that much, with prices rising high enough to slow the economy, curtailing demand. Over the last 40 years, American diesel inventories have never dropped below 85 million barrels, even at the end of the heating season. So now that the genie is out of the bottle, here are the choices the Biden admin faces, all of them unpalatable: The White House can let the market continue doing its job, with surging prices likely denting consumption and boosting supply. With refineries enjoying sky-high margins, more diesel should be coming. But the cost of the laissez-faire approach is higher inflation and a much faster recession as US industries shut down. Because diesel increases trucking costs, it’s a particularly pernicious sort of inflation as it quickly embeds into everything that needs to be transported, lifting core inflation measures. If the White House opts to intervene, the less harmful measure would be to release a small reserve of diesel that the government keeps for emergencies (clearly they have no problem doing that). The Northeast Home Heating Oil Reserve only has one million barrels, so it would be, at best, a Band-Aid. But it’s better than nothing, and Biden should order its release. For those asking, releasing more crude from the Strategic Petroleum Reserve would do little to resolve the problem, since the bottleneck is refining. Other interventions would have significant consequences, potentially harming American allies. In Washington, officials are mulling restricting, or even banning, diesel exports. If the measure is approved, it would leave neighbors including Mexico, Brazil and Chile short of diesel. In July, the last month with available full data, US diesel exports to Latin America hit a record high of 1.2 million barrels, double the amount a decade ago. Another option is forcing oil companies to build up stocks quickly ahead of the winter by setting a minimum inventory level, similar to what the European Union did for natural gas stockpiles. US officials are particularly worried about the northern part of the US East Coast, where inventories are low both seasonally and in absolute terms. The region, known in the industry’s jargon as PADD1A, is where the greatest demand is: Of the roughly 5.3 million households that use heating oil in America, more than 80% are in the Northeast. The problem with a mandatory minimum stock level is that it would force American refiners to import more or reduce their exports — or both. The impact in Latin America would be noticeable. Prices in the US may decline, but they will soar elsewhere. The bottom line, as the Bloomberg energy strategist notes, is that "the timing of today’s diesel crisis couldn’t be worse." That's because the EU, which relies still on Russian diesel exports, will ban imports from February onward (assuming it survives the winter). Europe will be short of diesel then, and Biden needs to consider that too. Ultimately, the imminent arrival of the bone-crushing recession will rebalance the market, reducing demand, particularly as the housing market cools and construction slows down, and consumer demand for goods declines, reducing trucking needs. That’s a heavy price to pay to resolve the problem, but with an administration as hopelessly clueless as this one, which today blasted the following tweet to make a point yet proved just the opposite... By Zerohedge.com More Top Reads From Oilprice.com: OPEC+ Insists Its Production Cut Was Not Political Global Oil Demand Rebounded By 2 Million Bpd In August Chinese Steel Manufacturers On The Brink Of Bankruptcy 1 Quote Share this post Link to post Share on other sites
Tom Nolan + 2,441 TN October 26, 2022 https://oilprice.com/Latest-Energy-News/World-News/A-Diesel-Shortage-Is-Spreading-Across-The-US.html A Diesel Shortage Is Spreading Across The U.S. By Charles Kennedy - Oct 26, 2022, 2:00 AM CDT A shortage of diesel fuel is spreading across the United States, with one company launching an emergency delivery protocol, requesting a 72-hour advance notice from clients to be able to make the delivery. Per a Bloomberg report, fuel supplier Mansfield Energy wrote in a note to its clients that “conditions are rapidly devolving” and “At times, carriers are having to visit multiple terminals to find supply, which delays deliveries and strains local trucking capacity.” U.S. diesel fuel stocks have been on a stable decline for months, reaching the lowest level since 2008 as of October. Currently, the United States only has 25 days of diesel supply in reserve. Bloomberg noted in its report that the Colonial Pipeline has been fully booked to carry diesel fuel and other distillates to the East Coast, which should ease the supply pressure but it will take a while, with the first deliveries expected in early November. Earlier this week, Goldman Sachs warned that the diesel shortage, which is not confined to the U.S. only but is spreading in Europe as well, will cause higher fuel prices this winter. In the U.S., the bank said, underinvestment in refining capacity and refinery closures and operation disruptions have all contributed to the scarcity of refined oil products this year but especially diesel, Bloomberg reported. “Refining constraints can create a sharp wedge between where crude and product markets clear, making policy management of crude supply less effective at controlling consumer prices,” the bank’s analysts wrote in a note. Meanwhile, the scarcity of diesel has prompted traders to start diverting cargoes with the fuel that were originally bound for Europe, Reuters reported earlier this month. Tanker tracking data showed that at least two tankers with some 90,000 tons of diesel and jet fuel that were initially bound for Europe were diverted toward the U.S. East Coast. By Charles Kennedy for Oilprice.com More Top Reads From Oilprice.com: Rising Sea Levels Spell Disaster For America’s Coastal Nuclear Plants Battery Makers Can’t Escape Rising Nickel Costs Nanotech Breakthrough Sets World Record For Solar Cell Efficiency 1 Quote Share this post Link to post Share on other sites
Tom Nolan + 2,441 TN October 26, 2022 https://www.zerohedge.com/commodities/major-fuel-supplier-code-red-diesel-crisis-hits-southeast Major Fuel Supplier On "Code Red" As Diesel Crisis Hits Southeast by Tyler Durden Wednesday, Oct 26, 2022 - 10:40 AM Diesel supplies are very scarce across the Northeast and in the Southeast. Supplies are at the lowest seasonal level for this time of year, and the US only has 25 days left of the industrial fuel in storage. The crisis gripping the diesel market appears to be getting out of hand as one fuel supply logistics company initiated emergency protocols this week. "Because conditions are rapidly devolving and market economics are changing significantly each day, Mansfield is moving to Alert Level 4 to address market volatility. Mansfield is also moving the Southeast to Code Red, requesting 72-hour notice for deliveries when possible to ensure fuel and freight can be secured at economical levels," Mansfield Energy wrote in an update to customers on Tuesday. The trucking firm has a fleet of tankers that delivers refined fuel products to more than 8,000 customers nationwide. Mansfield said in many areas on the East Coast, diesel fuel prices are "30-80 cents higher than the posted market average, because supply is tight." "At times, carriers are having to visit multiple terminals to find supply, which delays deliveries and strains local trucking capacity," the notice continued. This could mean that the US diesel market is so tight that supplies are running very low in certain areas. The crisis has sent supplies of the industrial fuel that power the economy, from trucks to vans to generators to freight trains to tractors, to the lowest level ever for this time of year. The latest EIA data shows there are only 25 days of diesel supply, the lowest since 2008; and while inventories are record low, the four-week rolling average of distillates supplied - a proxy for demand - rose to its highest seasonal level since 2007. Mansfield's is a warning sign that the record low storage levels is beginning to impact fuel supply networks. None of this should be surprising, as we've warned diesel markets have been in crisis for much of 2022. Our latest note titled "Forget Oil, The Real Crisis Is Diesel Inventories: The US Has Just 25 Days Left" outlines the severity of the crisis but also points out underinvestment in the nation's fuel-making capacity, refinery closures and disruptions, strong domestic demand, soaring exports for the fuel, and embargo on Russian energy products have all helped to deplete inventories and the price surge. Historically low diesel inventories have put a fuel trucking company on high alert for possible disruptions in the Southeast. 1 Quote Share this post Link to post Share on other sites
Tom Nolan + 2,441 TN October 31, 2022 https://oilprice.com/Energy/Energy-General/The-US-Diesel-Shortage-Is-Worsening.html The U.S. Diesel Shortage Is Worsening By Tsvetana Paraskova - Oct 31, 2022, 10:00 AM CDT The U.S. diesel shortage is worsening as distillate inventories crash to multi-year lows. U.S. refiners permanently shut down some refinery capacity at the start of the pandemic when fuel demand plunged. A diesel shortage and high diesel prices don’t bode well for the global economy, which could tip into recession at some point next year. Join Our Community Multi-year low inventories and constraints in supply are exacerbating a diesel shortage in the United States, especially on the East Coast. Diesel demand continues to be strong after recovering faster from the pandemic slump than other fuels such as gasoline, refiners say. But several factors have combined this year to deplete U.S. distillate inventories, which include diesel and heating oil. And ahead of the winter, the distillate fuel crunch is worsening. U.S. refining capacity is now lower than it was before Covid, as operable refinery capacity shrank in 2021 for a second consecutive year to stand at 17.9 million barrels per calendar day as of January 1, 2022, according to EIA estimates. U.S. refiners permanently shut down some refinery capacity at the start of the pandemic when fuel demand plunged, while others closed facilities to convert them into biofuel refineries. Some refineries were under maintenance this autumn, reducing the availability of products. In addition, the U.S. banned imports of all Russian energy products after the Russian invasion of Ukraine and hasn’t imported any petroleum products from Russia since April Lower refinery capacity in the U.S. since the pandemic, seasonal maintenance at refineries globally, and a major strike in France have all combined in recent weeks to create a shortage of middle distillates, not only in the United States, but also worldwide. The world is also scrambling for diesel supply also in view of the looming EU embargo on Russian fuel imports by sea, expected to kick in in early February. A diesel shortage and high diesel prices don’t bode well for the global economy, which is slowing down and could tip into recession at some point next year. Distillate fuels are used in transportation, agriculture, manufacturing, and heating In the U.S., distillate fuel inventories are about 20% below the five-year average for this time of year, according to the EIA’s latest weekly inventory report. The U.S. has just 25 days of diesel supply in reserve, with some regional markets very tight. According to CNBC, U.S. diesel reserves at the end of October have never been so low since 1951, with the Northeast most exposed to low levels of diesel stocks. Not that refiners aren’t trying—refinery utilization on the East Coast was at 102.5% in the week to October 21, per EIA data. Yet, distillate inventories are much lower than normal, and diesel and heating oil prices remain high and stoke inflation as they make consumer goods and heating bills more expensive. Households in the Northeast who rely on heating oil for space heating will see 27% higher bills this winter compared to last winter, the EIA said in its Winter Fuels Outlook in October. “Our forecast for heating oil margins this winter reflects price pressures that have currently been affecting the U.S. distillate market, including low inventories, low imports, and limited refining capacity,” the EIA said. For diesel, one fuel supplier has already issued an alert for the East Coast. “East Coast fuel markets are facing diesel supply constraints due to market economics and tight inventories,” Mansfield said last week. “Because conditions are rapidly devolving and market economics are changing significantly each day, Mansfield is moving to Alert Level 4 to address market volatility. Mansfield is also moving the Southeast to Code Red, requesting 72 hour notice for deliveries when possible to ensure fuel and freight can be secured at economical levels,” the supplier said. The Biden Administration hasn’t ruled out the idea of limiting U.S. fuel exports in order to restore inventories and lower prices. Refiners are opposed to that idea, saying that “Banning or limiting the export of refined products would likely decrease inventory levels, reduce domestic refining capacity, put upward pressure on consumer fuel prices, and alienate U.S. allies during a time of war.” Tom Kloza, Global Head of Energy Analysis at OPIS, told USA Today last week, “Between now and the end of November, if we don’t build inventories, the wolf will be at the door.” “And it will look like a big ugly wolf if it’s a cold winter.” By Tsvetana Paraskova for Oilprice.com More Top Reads From Oilprice.com: 83% Of Americans Are Concerned About High Gasoline And Energy Prices Consequences Or Cooperation: How Will The U.S. Deal With OPEC? Biden Is Running U.S. Energy Security Into The Ground Quote Share this post Link to post Share on other sites
Tom Nolan + 2,441 TN November 8, 2022 https://oilprice.com/Energy/Gas-Prices/Four-Reasons-Why-The-US-Is-Grappling-With-A-Diesel-Shortage.html Four Reasons Why The U.S. Is Grappling With A Diesel Shortage By Robert Rapier - Nov 05, 2022, 4:00 PM CDT Distillate levels in the United States have plummeted to the lowest levels since 2008. Low distillate inventories have sent diesel prices soaring. Four primary factors lead to this shortage. Join Our Community Last week, the Energy Information Administration (EIA) reported that distillate inventories were at their lowest levels since 2008. (The primary distillates are diesel, jet fuel ,and heating oil). However, in 2008 distillate levels were low coming out of spring. Currently, they are low going into fall. That’s far worse than the situation in 2008. Distillate demand generally spikes in spring — when farmers are planting crops — and in fall, when they are harvesting those crops and people start buying fuel oil for winter. Thus, a low distillate inventory in late April 2008 isn’t quite as serious as a low inventory in October 2022. In fact, distillate inventories haven’t been this low in October since the EIA began reporting this data in 1982. These low distillate inventories are why diesel prices are above $5.00 a gallon nationwide, even though the nationwide average price for gasoline has dropped below $4.00 a gallon. Why is there a diesel shortage this year? There are four factors, but two of those factors are in play every year. As mentioned above, distillate demand spikes at this time of year. But, it does that every year. This is also the time of year that refineries are doing maintenance. They tend to do that in the spring and fall, which is when demand is lower and the weather is decent. So, refinery capacity drops at this time of year. Third, U.S. refinery capacity has fallen in the past few years as several unprofitable refineries were closed. So, that’s a new factor that has appeared in the past couple of years. Related: Maersk Reports Record Profits But Warns Of Challenges Ahead But the primary reason is the cutoff of Russian imports. Prior to Russia’s invasion of Ukraine, the U.S. was importing nearly 700,000 barrels per day (BPD) of petroleum and petroleum products. Most of those imports were finished products and refinery inputs that boosted distillate supplies in the U.S. The loss of those Russian imports have caused problems for refineries as they struggle to fill holes in their product slates. Refineries do have a small amount of flexibility in shifting gasoline production to diesel production. But it’s a relatively small amount (e.g., ~5% in a refinery I once worked in). That also means that if refiners do shift production, that also potentially creates shortages in the gasoline market. Some relief is on the way, as some diesel imports are on the way from Europe to the East Coast. But, the distillate market won’t likely return to normal before next summer at the earliest. By Robert Rapier More Top Reads From Oilprice.com: Visualizing Energy Poverty Across Europe Collapse Of Asia’s Largest Aluminum Producer Leaves Massive Hole In Market Azerbaijan And Georgia Have Big Plans For Energy Exports To Europe Quote Share this post Link to post Share on other sites
Tom Nolan + 2,441 TN November 11, 2022 https://oilprice.com/Energy/Energy-General/Why-US-Diesel-Exports-Havent-Dried-Up-During-A-Domestic-Shortage.html Why U.S. Diesel Exports Haven’t Dried Up During A Domestic Shortage By Robert Rapier - Nov 11, 2022, 10:00 AM CST The U.S. is dealing with a diesel shortage at the moment, a fact that has led some consumers to question why the U.S. is still exporting the fuel. Ultimately, the export of diesel is due to economics, with companies able to sell their products for a higher price abroad. Two factors that add to the amount of diesel being exported are shipping regulations (notably the Jone Act) and environmental regulations (promoting low-sulfur diesel). Join Our Community Following my recent article — Why The U.S. Has A Diesel Shortage — one reader pointed out that I omitted one factor from my analysis. Even as the U.S. grapples with one of the worst diesel shortages on record, U.S. companies are exporting more than a million barrels of distillates a day. That’s a fair point, but it isn’t a new development. U.S. companies have been exporting more than a million barrels a day of distillates for about a decade. The obvious question, then, is why this is being done. The short and simple answer is that companies are doing it because they can, and because they are making more money doing this than selling it in the U.S. Consumers may complain, but ultimately these companies are trying to make as much money as they can, and that means selling products to the highest bidders. A U.S. Gulf Coast refiner who wishes to ship distillates to the East Coast must abide by the Jones Act, which requires any cargo shipped between U.S. ports to be carried by U.S. ships, with American crews. This can drive up costs, and make it more economical for that Gulf Coast refiner to export to Europe or South America. Another important point to note is that sometimes distillates are exported because the product doesn’t meet U.S. standards. For example, in 2006 EPA began to phase-in more regulations to lower the amount of sulfur in diesel fuel to 15 parts per million (PPM). This required costly investments by refiners to comply, but some refiners chose to continue making high-sulfur diesel and to export that to countries with less stringent regulations. That practice continues today and explains some of the exports. That is ultimately a business decision for each company, although it’s understandable that consumers would be upset by such decisions. The other obvious question — which I am often asked — is why don’t we ban companies from exporting fuel during a fuel crisis? That’s ultimately a political question. Would the crisis be eased if such a ban were in place? It’s hard to argue that it wouldn’t, but it would exacerbate the crisis elsewhere. Europe is already grappling with a fuel crisis due to the situation in Ukraine. They are relying on U.S. exports to help ease their fuel burdens headed into winter. An American consumer may say that this isn’t our problem, but this isn’t being done for altruistic reasons. Some countries are in worse shape than the U.S. with respect to fuel supplies, and they are willing to pay more to obtain them. That, in a nutshell, is why companies are exporting diesel during a diesel shortage. By Robert Rapier More Top Reads From Oilprice.com: EU Grants Moldova $250 Million In Aid To Tackle Energy Crisis Energy Execs Tell Granholm Shuttered U.S. Oil Refineries Won’t Restart IMF: Middle East Needs To Invest $1 Trillion By 2030 To Meet Emissions Pledges Quote Share this post Link to post Share on other sites
Tom Nolan + 2,441 TN November 17, 2022 https://oilprice.com/Latest-Energy-News/World-News/US-Diesel-Inventories-Hit-Historic-Lows-At-The-Worst-Possible-Time.html U.S. Diesel Inventories Hit Historic Lows At The Worst Possible Time By Tsvetana Paraskova - Nov 17, 2022, 3:22 AM CST U.S. distillate stocks, which include diesel and heating oil, have slumped to their lowest level for this time of the year since 1951, just as the heating season starts and the EU embargo on Russian oil product imports kicks in in February. Despite a small build in America’s distillate inventories last week, the levels are still at their lowest level since 1951, according to Financial Times estimates. The historically low stocks have pushed diesel prices much higher than the smaller rises in gasoline and crude oil this year. Since diesel is the primary fuel of the economy and long-haul transportation, the high diesel prices continue to fuel inflation. In the week ending November 11, distillate fuel inventories increased by 1.1 million barrels and are about 15% below the five-year average for this time of year, the EIA said in its weekly inventory report on Wednesday. At 107.4 million barrels, those stocks are the lowest ever seen for this season of the year. “The bulk of the increase in distillate stocks was on the US East Coast. And while this is helpful, stocks in the region are still at their lowest levels on record for this time of year,” ING strategists said on Thursday, commenting on the EIA inventory data. Very low diesel stockpiles and lower refining capacity since the pandemic have driven diesel prices in the United States higher to the point of reaching a record-high premium over gasoline and crude oil. Going forward, the supply of diesel in the U.S. and globally is set to tighten even further with the EU embargoes on imports of Russian crude and products, starting in December and February, respectively. “The competition for non-Russian diesel barrels will be fierce, with EU countries having to bid cargoes from the US, Middle East and India away from their traditional buyers,” International Energy Agency (IEA) said in its monthly report earlier this week. “Increased refinery capacity will eventually help ease diesel tensions. However, until then, if prices go too high, further demand destruction may be inevitable for the market imbalances to clear,” said the agency, which sees stubbornly high diesel prices fueling inflation as well as slowing economies leading to a slight decline in global diesel demand in 2023. By Tsvetana Paraskova for Oilprice.com More Top Reads From Oilprice.com: Tesla-Backed Mine Faces Trouble In The South Pacific Russia Pushes Kazakhstan To Lower Rail Transit Feels For Agricultural Goods Chinese Automakers To Begin Production At Kazakhstan Factory In 2024 Quote Share this post Link to post Share on other sites
Tom Nolan + 2,441 TN November 21, 2022 https://oilprice.com/Energy/Energy-General/Europe-Races-To-Stock-Up-On-Russian-Diesel-Ahead-Of-Embargo.html Europe Races To Stock Up On Russian Diesel Ahead Of Embargo By Tsvetana Paraskova - Nov 21, 2022, 9:00 AM CST Russian diesel loadings bound for the Amsterdam-Rotterdam-Antwerp hub jumped by 126% to 215,000 between Nov.1 and Nov.11. Russia is still the biggest supplier of diesel to Europe. Europe needs to replace some 500,000 bpd of diesel supplies. Join Our Community Europe has hiked its diesel imports from Russia this month as the EU embargo on imports of Russian oil products starting on February 5 draws closer, oil flow analytics show. Less than three months before the embargo kicks in, Russia is still the biggest supplier of diesel to Europe, which will have to replace more than 500,000 barrels per day (bpd) of diesel supply after February, the International Energy Agency (IEA) says. Russian diesel loadings bound for the Amsterdam-Rotterdam-Antwerp (ARA) hub jumped by 126% to 215,000 bpd between November 1 and November 12, Pamela Munger, senior market analyst at energy analytics firm Vortexa, told Reuters. “While a flood of East of Suez diesel imports has improved Europe’s positioning for the upcoming winter, Russia-Europe flows are rising again ahead of the 5 Feb EU import ban,” David Wech, Chief Economist at Vortexa, wrote in an article last week. EU and UK imports of diesel from non-Europe/non-Russian sources surpassed a massive 1 million bpd through October, driven by high supply from the Middle East and Asia, Wech said. It is even more challenging to make calls about what will happen with Russian diesel after the EU embargo than with what would happen with Russian crude oil, the ban on which begins on December 5, according to Vortexa. Related: A Quarter Of All Americans Could Face Energy Emergencies This Winter Per the IEA estimates in its Oil Market Report for November, EU countries had reduced Russian diesel imports by 50,000 bpd to 560,000 bpd by October. “When the crude and product embargoes come into full force in December and February, respectively, an additional 1.1 mb/d of crude and 1 mb/d of diesel, naphtha and fuel oil will have to be replaced,” the IEA said in the report last week. As the EU embargo on imports of Russian diesel enters into force, “The competition for non-Russian diesel barrels will be fierce, with EU countries having to bid cargoes from the US, Middle East and India away from their traditional buyers,” the agency said. “Increased refinery capacity will eventually help ease diesel tensions. However, until then, if prices go too high, further demand destruction may be inevitable for the market imbalances to clear,” the IEA noted. By Tsvetana Paraskova for Oilprice.com More Top Reads From Oilprice.com: Russia’s Oil Output Set To Fall By 1.5 Million Bpd In December M&A Boom May Not Lead To Drilling Spree In U.S Shale New Englanders Are Fed Up With High Energy Prices Quote Share this post Link to post Share on other sites
Tom Nolan + 2,441 TN November 23, 2022 https://oilprice.com/Latest-Energy-News/World-News/Strike-At-BPs-Largest-European-Refinery-Could-Deepen-Diesel-Crisis.html Strike At BP’s Largest European Refinery Could Deepen Diesel Crisis By Josh Owens - Nov 22, 2022, 12:30 PM CST Refinery workers at BP’s biggest refinery in Europe are on a partial strike over demands for higher wages and will not cooperate in efforts to restart the Rotterdam refinery, which is currently offline. Employees at the 400,000-bpd refinery, a major supplier of diesel to northern Europe, threatened earlier this month to go on a strike if their pay rise demands are not met. The Rotterdam refinery accounts for almost 3% of northern Europe’s refining capacity, and delays to its restart could exacerbate the diesel crunch in Europe. In early November, members of the FNV trade union voted down an early offer from BP about a pay rise, a union representative told Argus. The refinery was halted last week after a fault was found. The fault has been fixed, but workers will not cooperate in the restart of production, a representative of the CNV Vakmensen union told Bloomberg on Tuesday. BP has indicated that it plans to restart the refinery early this week. “We will help resolve the problems until the facilities are ready to be restarted, and then we’ll stop, that’s our intention,” Jaap Bosma of the CNV union told Reuters on Monday. The strike at one of Europe’s biggest refineries comes weeks after strikes at refineries in France left more than 60% of the country’s refining capacity offline while gas stations in and around Paris and in the northern part of the country began to run out of fuel. A delay in the BP Rotterdam refinery restart also comes as Europe is scrambling for diesel supply and stocking up on Russian diesel while it still can. Europe has hiked its diesel imports from Russia this month as the EU embargo on imports of Russian oil products starting on February 5 draws closer, oil flow analytics showed. As the EU embargo on imports of Russian diesel enters into force, “The competition for non-Russian diesel barrels will be fierce, with EU countries having to bid cargoes from the US, Middle East and India away from their traditional buyers,” the International Energy Agency (IEA) said in its Oil Market Report for November. By Josh Owens for Oilprice.com More Top Reads From Oilprice.com: UK Oil And Gas Companies Face $24 Billion Well-Plugging Bill Oil Tanker Rates Soar To Astronomical Levels Gazprom Threatens To Curb European Gas Flows Through Ukraine Quote Share this post Link to post Share on other sites
Tom Nolan + 2,441 TN November 24, 2022 EXCERPT Mark Finley, an energy fellow at Rice University's Baker Institute of Public Policy, explained to Bloomberg that elevated diesel prices could cost the US economy $100 billion: "Anything and everything that gets moved in our economy, diesel is there. https://www.zerohedge.com/commodities/most-crucial-industrial-fuel-faces-global-shortage Most Crucial Industrial Fuel Faces Global Shortage by Tyler Durden Thursday, Nov 24, 2022 - 04:45 AM A perfect storm in global diesel markets is unfolding. Refining capacities are tight, and stockpiles are being depleted as the Northern Hemisphere cold season begins. Supply crunches could jeopardize critical transportation networks since the industrial fuel powers ships, trucks, and trains. The fuel is also used for heating homes and businesses, as well as a power generation source for utilities. "Within months, almost every region on the planet will face a danger of a diesel shortage just as supply crunches in nearly all the world's markets have worsened inflation and hurt growth," Bloomberg warned. The economic impact of soaring diesel prices and shortages worldwide could have devastating effects, such as an inflation accelerant that would burden households and businesses. ARTICLE WITH CHARTS CONTINUES Quote Share this post Link to post Share on other sites
Tom Nolan + 2,441 TN November 25, 2022 https://oilprice.com/Energy/Energy-General/The-Diesel-Crunch-Is-Finally-Causing-Demand-Destruction.html The Diesel Crunch Is Finally Causing Demand Destruction By Tsvetana Paraskova - Nov 25, 2022, 5:00 PM CST Diesel inventories slumped to their lowest level for the time of the year since 1951. signs have emerged that weaker demand in the past weeks may have slowly started to rebuild diesel inventories. Refiners are processing more crude oil to capture the still high refining margins. Join Our Community High prices seem to have started to weigh on diesel demand in the United States, where distillate inventories – comprising diesel and heating oil – have been slowly rising over the past few weeks. American distillate inventories are still below the five-year average, but the gap in stocks compared to previous years has slowly started to narrow, suggesting that high prices are hitting demand, while encouraging more refinery output thanks to solid refining margins. In this week’s inventory report, the U.S. Energy Information Administration said that distillate stocks rose by 1.7 million barrels in the week to November 18, with production rising to an average of 5.1 million barrels per day (bpd). Distillate fuel inventories are still about 13% below the five-year average for this time of year, but two months ago, they were more than 20% below the five-year average for that time of the year. Earlier this autumn, U.S. distillate stocks slumped to their lowest level for this time of the year since 1951, just as the heating season started and a few months ahead of the EU embargo on Russian oil product imports, which goes into effect in February. Now signs have emerged that weaker demand in the past weeks may have slowly started to rebuild diesel inventories, contrary to seasonal trends. Distillate inventories in the U.S. rose by 3 million barrels in the six weeks to November 18, according to estimates by Reuters’ senior market analyst John Kemp based on EIA data. Related: How Will Republicans Influence Energy Policy In 2023? In products supplied – a proxy of implied demand – distillate fuel product supplied averaged 4.0 million bpd over the past four weeks, down by 3.5% from the same period last year, the EIA data showed. However, as implied demand slowed, refineries boosted run rates in the week to November 18, raising overall U.S. refinery utilization to 93.9%, up from 92.9% for the previous week. This compares with 88.6% refinery utilization over the same week last year. “Higher refinery runs over the week, along with weaker implied demand for products meant that large builds were seen on the refined product side,” ING strategists said this week, commenting on the EIA report. Refiners are processing more crude oil to capture the still high refining margins, but demand seems to cool off, not least because of high diesel prices, which haven’t come off this year’s record high as fast as gasoline prices have. As of November 21, the average retail diesel price in the United States was $5.233 per gallon, or $1.509/gal higher than at this time last year. To compare, the average gasoline price in the U.S. on the same day was $0.253 per gallon higher than a year ago, EIA data showed. In New England – where distillate inventories were at their lowest level ever at the start of the heating season and where 33% of homes use heating oil as the primary heating fuel – the diesel price is nearly $6/gal, at $5.963 on November 21, or $2.297/gal higher than last year. Yet, demand for diesel – the primary fuel of the economy – is already showing signs of weakness, also as a result of high prices. However, the recent drop in international crude oil prices and lower implied demand in the U.S. while distillate production is rising have led to a decline in America’s diesel prices. A total of 47 of the 50 states are seeing average diesel prices drop from their week-ago levels, with diesel prices down over 10c/gal from a week ago in 19 states, Patrick De Haan, head of petroleum analysis at GasBuddy, said on Wednesday. Globally, stubbornly high diesel prices fueling inflation as well as slowing economies are expected to lead to a slight decline in diesel demand in 2023, the International Energy Agency (IEA) said in its monthly report last week. Last year, global diesel/gasoil demand growth stood at 1.5 million bpd. This year’s growth is expected at just 400,000 bpd, while next year, diesel demand will post a small decline “under the weight of persistently high prices, a slowing economy and despite increased gas-to-oil switching,” the IEA said. By Tsvetana Paraskova for Oilprice.com More Top Reads From Oilprice.com: A Quarter Of All Americans Could Face Energy Emergencies This Winter Today’s Energy Crisis Is Unlike Anything We’ve Ever Seen Before EU Discusses $65-70 Price Cap On Russian Oil 1 Quote Share this post Link to post Share on other sites
Ron Wagner + 643 November 26, 2022 On 10/26/2022 at 11:02 AM, Tom Nolan said: https://www.zerohedge.com/commodities/major-fuel-supplier-code-red-diesel-crisis-hits-southeast Major Fuel Supplier On "Code Red" As Diesel Crisis Hits Southeast by Tyler Durden Wednesday, Oct 26, 2022 - 10:40 AM Diesel supplies are very scarce across the Northeast and in the Southeast. Supplies are at the lowest seasonal level for this time of year, and the US only has 25 days left of the industrial fuel in storage. The crisis gripping the diesel market appears to be getting out of hand as one fuel supply logistics company initiated emergency protocols this week. "Because conditions are rapidly devolving and market economics are changing significantly each day, Mansfield is moving to Alert Level 4 to address market volatility. Mansfield is also moving the Southeast to Code Red, requesting 72-hour notice for deliveries when possible to ensure fuel and freight can be secured at economical levels," Mansfield Energy wrote in an update to customers on Tuesday. The trucking firm has a fleet of tankers that delivers refined fuel products to more than 8,000 customers nationwide. Mansfield said in many areas on the East Coast, diesel fuel prices are "30-80 cents higher than the posted market average, because supply is tight." "At times, carriers are having to visit multiple terminals to find supply, which delays deliveries and strains local trucking capacity," the notice continued. This could mean that the US diesel market is so tight that supplies are running very low in certain areas. The crisis has sent supplies of the industrial fuel that power the economy, from trucks to vans to generators to freight trains to tractors, to the lowest level ever for this time of year. The latest EIA data shows there are only 25 days of diesel supply, the lowest since 2008; and while inventories are record low, the four-week rolling average of distillates supplied - a proxy for demand - rose to its highest seasonal level since 2007. Mansfield's is a warning sign that the record low storage levels is beginning to impact fuel supply networks. None of this should be surprising, as we've warned diesel markets have been in crisis for much of 2022. Our latest note titled "Forget Oil, The Real Crisis Is Diesel Inventories: The US Has Just 25 Days Left" outlines the severity of the crisis but also points out underinvestment in the nation's fuel-making capacity, refinery closures and disruptions, strong domestic demand, soaring exports for the fuel, and embargo on Russian energy products have all helped to deplete inventories and the price surge. Historically low diesel inventories have put a fuel trucking company on high alert for possible disruptions in the Southeast. Diesel prices affect farmers costs, and shipping prices on everything. Quote Share this post Link to post Share on other sites
RichieRich216 + 454 RK November 26, 2022 On 10/31/2022 at 3:25 PM, Tom Nolan said: https://oilprice.com/Energy/Energy-General/The-US-Diesel-Shortage-Is-Worsening.html The U.S. Diesel Shortage Is Worsening By Tsvetana Paraskova - Oct 31, 2022, 10:00 AM CDT The U.S. diesel shortage is worsening as distillate inventories crash to multi-year lows. U.S. refiners permanently shut down some refinery capacity at the start of the pandemic when fuel demand plunged. A diesel shortage and high diesel prices don’t bode well for the global economy, which could tip into recession at some point next year. Join Our Community Multi-year low inventories and constraints in supply are exacerbating a diesel shortage in the United States, especially on the East Coast. Diesel demand continues to be strong after recovering faster from the pandemic slump than other fuels such as gasoline, refiners say. But several factors have combined this year to deplete U.S. distillate inventories, which include diesel and heating oil. And ahead of the winter, the distillate fuel crunch is worsening. U.S. refining capacity is now lower than it was before Covid, as operable refinery capacity shrank in 2021 for a second consecutive year to stand at 17.9 million barrels per calendar day as of January 1, 2022, according to EIA estimates. U.S. refiners permanently shut down some refinery capacity at the start of the pandemic when fuel demand plunged, while others closed facilities to convert them into biofuel refineries. Some refineries were under maintenance this autumn, reducing the availability of products. In addition, the U.S. banned imports of all Russian energy products after the Russian invasion of Ukraine and hasn’t imported any petroleum products from Russia since April Lower refinery capacity in the U.S. since the pandemic, seasonal maintenance at refineries globally, and a major strike in France have all combined in recent weeks to create a shortage of middle distillates, not only in the United States, but also worldwide. The world is also scrambling for diesel supply also in view of the looming EU embargo on Russian fuel imports by sea, expected to kick in in early February. A diesel shortage and high diesel prices don’t bode well for the global economy, which is slowing down and could tip into recession at some point next year. Distillate fuels are used in transportation, agriculture, manufacturing, and heating In the U.S., distillate fuel inventories are about 20% below the five-year average for this time of year, according to the EIA’s latest weekly inventory report. The U.S. has just 25 days of diesel supply in reserve, with some regional markets very tight. According to CNBC, U.S. diesel reserves at the end of October have never been so low since 1951, with the Northeast most exposed to low levels of diesel stocks. Not that refiners aren’t trying—refinery utilization on the East Coast was at 102.5% in the week to October 21, per EIA data. Yet, distillate inventories are much lower than normal, and diesel and heating oil prices remain high and stoke inflation as they make consumer goods and heating bills more expensive. Households in the Northeast who rely on heating oil for space heating will see 27% higher bills this winter compared to last winter, the EIA said in its Winter Fuels Outlook in October. “Our forecast for heating oil margins this winter reflects price pressures that have currently been affecting the U.S. distillate market, including low inventories, low imports, and limited refining capacity,” the EIA said. For diesel, one fuel supplier has already issued an alert for the East Coast. “East Coast fuel markets are facing diesel supply constraints due to market economics and tight inventories,” Mansfield said last week. “Because conditions are rapidly devolving and market economics are changing significantly each day, Mansfield is moving to Alert Level 4 to address market volatility. Mansfield is also moving the Southeast to Code Red, requesting 72 hour notice for deliveries when possible to ensure fuel and freight can be secured at economical levels,” the supplier said. The Biden Administration hasn’t ruled out the idea of limiting U.S. fuel exports in order to restore inventories and lower prices. Refiners are opposed to that idea, saying that “Banning or limiting the export of refined products would likely decrease inventory levels, reduce domestic refining capacity, put upward pressure on consumer fuel prices, and alienate U.S. allies during a time of war.” Tom Kloza, Global Head of Energy Analysis at OPIS, told USA Today last week, “Between now and the end of November, if we don’t build inventories, the wolf will be at the door.” “And it will look like a big ugly wolf if it’s a cold winter.” By Tsvetana Paraskova for Oilprice.com More Top Reads From Oilprice.com: 83% Of Americans Are Concerned About High Gasoline And Energy Prices Consequences Or Cooperation: How Will The U.S. Deal With OPEC? Biden Is Running U.S. Energy Security Into The Ground Leave it to the current 80-year-old dementia patient at the White House. His handlers, who run the place just give him ice cream to leave his basement in Delaware; they do however have to provide pubescent teenagers for a appearance in public for him to sniff and touch. Quote Share this post Link to post Share on other sites
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