{"id":6110,"date":"2022-05-15T19:53:35","date_gmt":"2022-05-15T19:53:35","guid":{"rendered":"https:\/\/euromenaenergy.com\/?p=6110"},"modified":"2022-05-15T19:53:35","modified_gmt":"2022-05-15T19:53:35","slug":"u-s-diesel-shortages-lift-refining-margins-to-a-record","status":"publish","type":"post","link":"https:\/\/emimer.com\/?p=6110","title":{"rendered":"U.S. diesel shortages lift refining margins to a record"},"content":{"rendered":"<p class=\"text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI\" data-testid=\"paragraph-0\">LONDON, May 10 (Reuters) &#8211; Global stocks of refined petroleum products have fallen to critically low levels as refineries prove unable to keep up with surging demand especially for the diesel-like fuels used in manufacturing and freight transportation.<\/p>\n<p class=\"text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI\" data-testid=\"paragraph-1\">The result has been a surge in prices refiners receive for selling fuels compared with prices they pay for buying crude and other feedstocks, boosting their profitability significantly.<\/p>\n<p class=\"text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI\" data-testid=\"paragraph-2\">In the United States, refiners currently receive roughly an average of more than $150 per barrel from the sale of gasoline and diesel at wholesale prices, while paying only around $100 to purchase crude.<\/p>\n<p class=\"text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI\" data-testid=\"paragraph-3\">The indicative 3-2-1 margin of $50 per barrel is based on the assumption a refinery produces two barrels of gasoline and one barrel of diesel from refining three barrels of crude.<\/p>\n<p class=\"text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI\" data-testid=\"paragraph-4\">The margin is meant to be representative for an \u201caverage\u201d refinery and is a gross figure out of which refiners have to pay for labour, electricity, gas, hydrogen, catalysts, pipeline transport and the cost of capital.<\/p>\n<div class=\"spacing-container__container__2g5QT spacing-container__max-width__zScFd\">\n<div class=\"ad-slot__container__FEnoz\">\n<div class=\"ad-slot__inner__2u45U ad-slot__others__mQ8-F\">\n<div>\n<div id=\"reuters_desktop_native_2\" class=\"ad-slot__slot__2lKAK\" data-google-query-id=\"CILp2Mqj4vcCFVKYhQodI0sB8A\">\n<div id=\"google_ads_iframe_\/4735792\/reuters.com\/markets\/commodities\/article_2__container__\"><iframe id=\"google_ads_iframe_\/4735792\/reuters.com\/markets\/commodities\/article_2\" tabindex=\"0\" title=\"3rd party ad content\" role=\"region\" name=\"google_ads_iframe_\/4735792\/reuters.com\/markets\/commodities\/article_2\" width=\"1\" height=\"1\" frameborder=\"0\" marginwidth=\"0\" marginheight=\"0\" scrolling=\"no\" aria-label=\"Advertisement\" data-google-container-id=\"5\" data-load-complete=\"true\" data-integralas-id-674ac204-4f59-490f-b0bd-eda2bb5670ba=\"\" data-mce-fragment=\"1\"><\/iframe><\/p>\n<div class=\"__fs-ancillary\">\n<div id=\"__fs-reportThisAd-reuters_desktop_native_2\">\n<div class=\"adl-report-ad-container \"><\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<p class=\"text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI\" data-testid=\"paragraph-5\">Net margins are narrower and refinery costs have been rising rapidly as result of widespread inflation ripping through the economy following the coronavirus pandemic.<\/p>\n<p class=\"text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI\" data-testid=\"paragraph-6\">Nonetheless, even allowing for rising input costs, gross margins have more than doubled from $20 at the end of 2021, ensuring refiners have a strong financial incentive to maximise crude processing and fuel production.<\/p>\n<h2 class=\"text__text__1FZLe text__dark-grey__3Ml43 text__medium__1kbOh text__heading_5__2krbj heading__base__2T28j heading__heading_5__2A2g-\" data-testid=\"Heading\">DISTILLATE FOCUS<\/h2>\n<p class=\"text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI\" data-testid=\"paragraph-7\">Gross margins are currently higher for making diesel (almost $60 per barrel) than for gasoline ($45 per barrel) reflecting the relative shortage of middle distillates.<\/p>\n<div class=\"spacing-container__container__2g5QT spacing-container__max-width__zScFd\">\n<div class=\"ad-slot__container__FEnoz\">\n<div class=\"ad-slot__inner__2u45U ad-slot__others__mQ8-F\">\n<div>\n<div id=\"reuters_desktop_native_3\" class=\"ad-slot__slot__2lKAK\" data-google-query-id=\"CMWHudej4vcCFRD0GwodGSYOxA\">\n<div id=\"google_ads_iframe_\/4735792\/reuters.com\/markets\/commodities\/article_3__container__\"><iframe id=\"google_ads_iframe_\/4735792\/reuters.com\/markets\/commodities\/article_3\" tabindex=\"0\" title=\"3rd party ad content\" role=\"region\" name=\"google_ads_iframe_\/4735792\/reuters.com\/markets\/commodities\/article_3\" width=\"1\" height=\"1\" frameborder=\"0\" marginwidth=\"0\" marginheight=\"0\" scrolling=\"no\" aria-label=\"Advertisement\" data-google-container-id=\"6\" data-load-complete=\"true\" data-integralas-id-bf08220b-d8f2-7ebc-140e-54147fd11c43=\"\" data-mce-fragment=\"1\"><\/iframe><\/p>\n<div class=\"__fs-ancillary\">\n<div id=\"__fs-reportThisAd-reuters_desktop_native_3\">\n<div class=\"adl-report-ad-container \"><\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<p class=\"text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI\" data-testid=\"paragraph-8\">(Chartbook:\u00a0<a class=\"text__text__1FZLe text__dark-grey__3Ml43 text__medium__1kbOh text__large__nEccO link__underline_default__2prE_\" href=\"https:\/\/tmsnrt.rs\/3PdSJdC\" target=\"_blank\" rel=\"noopener noreferrer\" data-testid=\"Link\">https:\/\/tmsnrt.rs\/3PdSJdC<\/a>)<\/p>\n<p class=\"text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI\" data-testid=\"paragraph-9\">U.S. distillate fuel oil stocks are 31 million barrels (23%) below the pre-pandemic five-year average compared with a deficit of only 6 million barrels (3%) in gasoline.<\/p>\n<p class=\"text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI\" data-testid=\"paragraph-10\">The squeeze on fuel inventories and refinery capacity is compounding already high prices for crude caused by sanctions on Russia and output restraint by OPEC+ and U.S. shale producers.<\/p>\n<p class=\"text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI\" data-testid=\"paragraph-11\">The resumption of international passenger aviation as quarantine restrictions are lifted is tightening the fuel market even further because jet fuel is broadly similar to diesel and gas oil.<\/p>\n<p class=\"text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI\" data-testid=\"paragraph-12\">The effective wholesale price of diesel has climbed to over $160 per barrel while gasoline is trading at over $150, based on futures for delivery in New York Harbor.<\/p>\n<p class=\"text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI\" data-testid=\"paragraph-13\">Once distributors\u2019 and retailers\u2019 margins and taxes are included, the average price at the pump paid by motorists has climbed to $236 per barrel for diesel and $186 per barrel for gasoline.<\/p>\n<p class=\"text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI\" data-testid=\"paragraph-14\">The refining margins and fuel prices cited in this column are all for the United States but the same shortage of refining capacity and fuel inventories is boosting diesel prices in Europe, and dragging up gasoline prices with them.<\/p>\n<h2 class=\"text__text__1FZLe text__dark-grey__3Ml43 text__medium__1kbOh text__heading_5__2krbj heading__base__2T28j heading__heading_5__2A2g-\" data-testid=\"Heading\">SLOWDOWN AHEAD<\/h2>\n<p class=\"text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI\" data-testid=\"paragraph-15\">There is scope for refiners to increase fuel production by postponing non-essential maintenance and running refineries flat out into the early autumn.<\/p>\n<p class=\"text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI\" data-testid=\"paragraph-16\">And some room to adjust the output mix by switching from maximum gasoline to maximum diesel mode in downstream processing units.<\/p>\n<p class=\"text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI\" data-testid=\"paragraph-17\">But any increase in diesel production is unlikely to be able to reverse the depletion of inventories fully and return them to pre-pandemic levels.<\/p>\n<p class=\"text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI\" data-testid=\"paragraph-18\">Prices will therefore have to continue rising until they begin to restrain consumption or the economy enters a cyclical downturn.<\/p>\n<p class=\"text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI\" data-testid=\"paragraph-19\">Consumers can reduce fuel use in the short term by consolidating freight loads (fewer voyages, flights and deliveries), reducing speeds (slower voyaging, flying and driving) and eliminating engine idling.<\/p>\n<p class=\"text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI\" data-testid=\"paragraph-20\">But the fuel savings are relatively modest and tend to degrade service levels, reduce capacity and increase capital costs.<\/p>\n<p class=\"text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI\" data-testid=\"paragraph-21\">By contrast, a slowdown in the business cycle delivers large simultaneous reductions in diesel use \u2013 absolutely or relative to trend \u2013 by freight firms, manufacturers, miners and construction firms.<\/p>\n<p class=\"text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI\" data-testid=\"paragraph-22\">Business cycle slowdowns have therefore tended to be the main path by which the distillate market and other fuel markets have rebalanced in the past.<\/p>\n<p class=\"text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI\" data-testid=\"paragraph-23\">The adjustment process is probably underway in 2022. The cyclical slowdown and reduced fuel demand could occur in one, two or all three of the major consuming regions.<\/p>\n<p class=\"text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI\" data-testid=\"paragraph-24\">Parts of China\u2019s economy appear to be in recession already as coronavirus lockdowns paralyse factories and transport systems and depress consumer spending.<\/p>\n<p class=\"text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI\" data-testid=\"paragraph-25\">Europe\u2019s economy is on the verge of recession as Russia\u2019s invasion of Ukraine, the sanctions imposed in response, soaring energy prices and rampant inflation disrupt manufacturing and depress household spending.<\/p>\n<p class=\"text__text__1FZLe text__dark-grey__3Ml43 text__regular__2N1Xr text__large__nEccO body__base__22dCE body__large_body__FV5_X article-body__element__2p5pI\" data-testid=\"paragraph-26\">The only major economy with significant momentum is the United States, but there, too, the rate of expansion is slowing, which will likely result in slower growth in distillate consumption later in the year.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>LONDON, May 10 (Reuters) &#8211; Global stocks of refined petroleum products have fallen to critically low levels as refineries prove unable to keep up with surging demand especially for the diesel-like fuels&#8230;<\/p>\n","protected":false},"author":1,"featured_media":6111,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[22],"tags":[46,48,57,68,76,77,81,82,86,87,88,90,96,99,103,107,109,111,112,113,121,122,134,137,139,146,148,160,174,176,183,184,201,202,209,222,230,232,233,239,244,246,249,250,252,256,262,263,267,277,279,280,283,285,288],"class_list":["post-6110","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-oil-gas","tag-aramco","tag-athens","tag-baroudi","tag-carbon","tag-climate","tag-climate-change","tag-closure-of-nuclear-power-plants","tag-co2","tag-cyprus","tag-decarbonising","tag-decarbonization","tag-democracy","tag-doha","tag-eastmed","tag-egypt","tag-embargo","tag-emissions","tag-energy","tag-energy-market","tag-energy-peace","tag-europe","tag-european","tag-fuels-russian-gas-oil-and-gas-natural-gas","tag-gas","tag-gazprom","tag-greece","tag-greenenergy","tag-international-maritime-disputes","tag-lebanon","tag-liquefied-natural-gas","tag-maritime-boundaries-east-mediterranean","tag-maritime-disputes","tag-offshore","tag-oil","tag-opec","tag-pollution","tag-poverty-alleviation","tag-putin","tag-qatar","tag-renewable-energy","tag-rosneft","tag-roudi","tag-russia","tag-russia-in-the-european-energy-sector","tag-russian-sanctions","tag-saudi","tag-solar","tag-solar-power","tag-straddling-hydrocarbons-reserves","tag-total","tag-trump","tag-turkey","tag-ukrain","tag-unclos","tag-usa"],"_links":{"self":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts\/6110","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=6110"}],"version-history":[{"count":0,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts\/6110\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/media\/6111"}],"wp:attachment":[{"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6110"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6110"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6110"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}