March 4, 2014
Tenth Tanker Diverts to U.S. from Europe Where Premiums Hit 16-Month Low
Moribund demand for jet fuel in northwest Europe has seen yet another Europe- bound tanker laden with the middle distillate head for the U.S., bringing total ships diverted across the Atlantic to 10 vessels carrying 515,000 metric tons, or just over 4 million bbl, since mid-December.
The Vitol-controlled Udine is today seen heading west across the Atlantic after passing through the Strait of Gibraltar instead of sailing north to northwest Europe or the U.K. as originally chartered, according to satellite-tracking data compiled by the OPIS Tanker Tracker.
The last two Europe-bound tankers tracked and diverted to the U.S. were in the third week of February, continuing a trend that arose in the final weeks of December as jet prices in New York outstripped those in Europe.
The Udine was one of seven tankers laden with around 370,000 tons (about 2.9 million bbl) of jet fuel that was tracked and scheduled to arrive in northwest Europe during the seven-day period beginning March 2, data show.
The OPIS Tanker Tracker compiles satellite-tracking and broker data to monitor jet fuel shipments into Europe from major exporters Asia, India, and the Middle East.
The northwest Europe jet cargo premium paid over front-month gasoil futures slumped further today and was assessed at $54.50, the lowest since October 2012.
February shipments of jet fuel shipments to Europe hit a five-month high of 1.83 million tons (around 460,000 b/d) according to the OPIS Tanker Tracker.
February 27, 2014
European Gasoline Export Flow Rises on Higher Demand from Africa, US, Mexico
The European gasoline export flow has received a temporary boost on higher demand from West Africa, the Caribbean, U.S. East Coast and Mexico, traders in the U.S. told OPIS on Thursday.
The expected higher gasoline export is reflected in the trans-Atlantic TC2 clean tanker rate hike. Tanker rates jumped to World Scale 140 points on Thursday from WS 105 on Monday.
The Gulf Coast is seen exporting more gasoline than usual to Canada and the Caribbean, leaving less for Mexican destinations. Mexico typically imports from the Gulf Coast due to the shorter ship voyage, but PMI will buy from Europe if needed. This has encouraged more tanker fixtures in Europe and higher tanker rates this week.
Also, a briefly opened F4 RBOB trans-Atlantic arbitrage window last week encouraged more tanker demand in Europe. These incremental cargoes, in addition to the system barrels, are expected to arrive in March. F4 RBOB is for March- April trading in the New York Harbor.
In addition to U.S. deliveries, West African demand saw a spike this week after staying relatively quiet in February.
Meanwhile, the sharply lower Gulf Coast gasoline prices this week are expected to have reopened the arbitrage window for exports to the Caribbean and Mexico.
Gulf Coast gasoline prices were hammered down sharply this week, partly due to lower demand for delivery to the Southeast, which is drawing down its inventories in preparation for the RVP switch in spring. The Southeast would need to switch from 13.5 RVP to 11.5 RVP to 9.0 RVP within a month.
February 25, 2014
HollyFrontier Postpones Q1 Navajo Refinery Turnaround until Autumn
HollyFrontier Corp. has postponed scheduled first-quarter turnaround maintenance at the Navajo refinery in Artesia, N.M., until October 2014, having gotten a jump on some of the work in December-January, the company said Tuesday.
As previously reported, processing rates at the 115,000-b/d refinery were reduced beginning in November 2013 as a result of issues with the waste-water treatment plant.
During the period of reduced throughputs, plant personnel performed maintenance at the refinery that led to the decision to postpone work on the crude unit, distillate hydrotreater and gasoil hydrocracker until October, company officials said in a conference call Tuesday.
While not citing the currently wide differential between WTI/Midland and WTI/Cushing as a reason for postponing maintenance at Artesia, president and CEO Mike Jennings noted the move's impact on HollyFrontier's Southwest refining economics.
"Right now that differential is out to about $10/bbl, so it's very attractive for the Southwest players," he said. He attributed the blowout to seasonal downtime in refining markets in the Southwest, growth in Permian crude production and the lack of pipeline infrastructure to move oil from the Permian either to the Cushing, Okla., storage hub or to Gulf Coast refineries.
"We expect it (the WTI Midland-Cushing differential) to normalize toward what we saw last year once this refinery maintenance period is completed," Jennings said.
The Artesia refinery returned to full rates by the end of January after installation of new processing equipment and secondary water filtering technology.
The remainder of the HFC 2014 turnaround schedule includes maintenance on a fluid catalytic cracker gofiner and alkylation unit at the 140,000-b/d El Dorado, Kan., refinery, the company said.
February 17, 2014
U.S. Gulf Coast Sees Stronger South American Diesel Demand; Europe Slows
While U.S. Gulf Coast diesel exports to Europe almost slowed to a halt, the robust export flow to South America has picked up that slack in the past week.
A total of 33 clean products tankers were booked last week for loading on the U.S. Gulf Coast. Of those, only four are bound for Europe and the rest are sailing to South America, the Caribbean and the east coast of Canada, according to a weekly tanker market report issued by Connecticut-based tanker broker firm Charles Weber.
The 31 ship booking represents a four-week high and is above the average of 25 observed during 2013. Seventeen ships were booked for delivery to South America, which was the highest since July 2013. Also, eight were booked for Caribbean delivery, and four to the east coast of Canada.
A majority of these ship bookings are for the second half of February loading, and a small number were for prompt loading. The bulk of the export cargoes are diesel.
OPIS notes that the European demand for U.S. Gulf Coast diesel has been slowed by a narrower heating oil-gasoil price spread in the past few weeks. The U.S. heating oil price has gained substantial ground since early this year because of low inventory and gas supply rationing. In a rare arbitrage move, the U.S. East Coast is expecting an influx of diesel cargoes from Russia and Europe in February.
Regional clean tanker availability continued to decline, and 44% fewer vessels were available than the recent high reached three weeks ago.
The narrowing supply/demand disparity allowed ship owners to command fresh tanker rate gains.
Freight rates for voyages to Latin America from the U.S. Gulf Coast gained 68% to about $20,308/day, adding about $120,000 to a lump sum of $600,000.
The U.S. Gulf Coast tanker rate for European delivery was pegged at World Scale 80 points a week ago, but it climbed to WS 90 late last week. Charles Weber expects this trans-Atlantic rate to continue to rise to WS 95 this week.
The tanker broker said that Gulf Coast products inventories remain elevated from a year ago, keeping pressure on a push to export ahead of spring refinery maintenance.
Meanwhile, the Europe-U.S. East Coast tanker rate has fallen WS 17.5 to WS 115 despite a stronger demand. The weakening European tanker rates were attributed to a growing tanker availability as ships continue to ballast without a cargo across the Atlantic to Europe.
Planned European crude unit maintenance schedules show offline capacity will peak in March, a month earlier than usual, according to the tanker report.
This will likely limit the demand for product tankers for March loading.
February 13, 2014
Northern Refiners Struggling to 'Clear' Gasoline in Midwinter
A glance at spot prices for gasoline across the seven major U.S. bulk markets finds no instance where cash traders can find a gasoline blendstock for less than $2.60/gal. But upon further review, there are a number of Rocky Mountain states where refiners are struggling to get $2.40-$2.50/gal for rack sales, or considerably less. It appears as though winter has combined with robust Midcontinent crude production and high refinery runs to make for a sloppy motor fuel picture in many frontier regions.
Nowhere is this more evident than in Montana. That state saw some bulk rack sales concluded in the last 10 days at less than $2.25/gal in some instances, OPIS has confirmed. Postings for E10 are commonly below $2.40/gal, more than 25cts/gal above Group 3 spot values and about 20cts/gal above recent cash transactions for sub-octane gas in the Pacific Northwest.
Sloppy gasoline markets with plentiful deals below rack postings also show up in Utah, Colorado and New Mexico with instances where refiners have had to move finished E10 blends at 5-15cts/gal under OPIS low postings. The discounted sales can wreak havoc with equity analysts who model refinery profits, as they typically crunch numbers from spot arenas to generate assessments of refinery returns.
The excess gasoline is in part a reflection of typically poor midwinter demand levels in the region, but can also be tied to very high runs for regional refiners who process discounted Canadian, West Texas or Midcontinent crude. Production of crude oil in the Lower 48 states advanced by 100,000 b/d in the most recent EIA report, and that puts it a tidy 1.102 million b/d above where it was one year ago.
Very high diesel and kerosene prices offset some of the refiner pain. The average price of ultra-low-sulfur diesel in many Rocky Mountain states is about $3.15/gal, or more than $132/bbl. Prices for kerosene, a much smaller "cut" of refinery output, have in some cases been above $150/bbl this winter.
Also, Midcontinent refiners who can run heavy Canadian crude, have plenty of room before they can cry poverty. The price of Western Canadian Select (WCS) has not moved higher in sympathy with the recent rally in WTI futures. Producers of WCS most recently have been willing to discount some $24/bbl off WTI in order to place their product, resulting in an FOB Alberta price of about $76/bbl, and a cost to some Rocky Mountain refiners of less than $80/bbl.