EIA: This Week in Petroleum - 14 August 2019 - eng Избранное

Среда, 14 августа 2019 20:24

Singapore gasoline crack spreads now among the world’s lowest

Asian refinery capacity expansions and increased throughput are affecting regional gasoline supply and crack spreads. Before 2015, gasoline crack spreads in Asia were frequently some of the world’s highest, reflecting low refinery capacity and high petroleum demand growth. However, since 2016, Asian gasoline crack spreads have fallen regularly to among the lowest globally. In China specifically, refinery investments and expansions have contributed to increasing gasoline yields and higher gasoline exports, up to 0.3 million barrels per day (b/d) in 2019 through June (Figure 1). These factors are contributing to downward pressure on gasoline prices and crack spreads in Singapore, the local market hub for petroleum products. In addition to ongoing Chinese refinery capacity expansions, increased petroleum product export quotas and slower transportation fuel demand growth within China are likely to result in continued increases in gasoline exports from China.

Figure 1. Chinese exports of motor gasoline

Chinese refinery runs increased in recent years as a result of newly constructed refinery and petrochemical complexes and secondary unit expansions to existing plants. For example, the 0.4 million b/d Hengli refinery in Dalian, Liaoning Province, began operating in the second quarter of 2019, and the 0.4 million b/d Rongsheng refinery and petrochemical complex in Zhejiang Province began operations at about the same time. According to China’s National Bureau of Statistics, Chinese refiners processed an all-time high level of crude oil in June 2019, exceeding 13.9 million b/d (Figure 2). In addition to increased refinery runs, some of the new refinery capacity is configured in ways that yield higher quantities of motor gasoline, resulting in growing supplies of gasoline available for export. Other distillation and secondary unit capacity increases are under construction and slated for startup between 2020 and 2023 and could add at least 0.5 million b/d of capacity.

Figure 2. Chinese processing of crude oil

Although published export data are incomplete, Chinese gasoline exports are likely supplying regional gasoline importers such as Indonesia, Malaysia, and Australia—countries that have generally been increasing their total levels of gasoline imports since about 2014, based on data from the Joint Organizations Data Initiative. Higher Chinese gasoline exports are adding supply to the regional market and contributing to lower gasoline crack spreads in Singapore. Based on the 250-day moving average—which represents about one year of trading and accounts for the seasonal changes in gasoline prices—Singapore gasoline crack spreads have declined to less than 10 cents per gallon as of August 13, which is about the same as European gasoline crack spreads, which generally have the lowest crack spreads globally (Figure 3). Separately, higher medium and sour crude oil prices, such as Dubai, have increased in 2019 compared with light and sweet crude oils, such as Brent, which is also a significant contributor to lower Asian gasoline crack spreads compared with other regions.

Figure 3. Gasoline crack spreads (250-day moving average)

Several factors are contributing to lower Singapore gasoline crack spreads. First, in addition to the new refinery capacity expansions in China, other countries in the region have added capacity since 2014–15, including Saudi Arabia, the United Arab Emirates, India, and Vietnam. Although some of the output from these refiners is meeting domestic demand, the increase in gasoline production is also adding supply to the regional gasoline trading pool.

Second, Chinese regulatory changes since 2015–16 increased capacity utilization for private sector refiners. Before 2015–16, these refiners had limited access to crude oil imports and ran fuel oil, a lower-quality feedstock. In 2015, the Chinese government began granting licenses to these refiners to import crude oil, allowing them to increase utilization and produce higher-value petroleum products, such as gasoline, for Chinese domestic consumers. Simultaneously, the government granted China’s state-owned refiners—Sinopec and PetroChina—increased petroleum product export quotas as they expanded capacity and produced more petroleum products.

Third, Chinese domestic demand growth for transportation fuels has decelerated. China’s gross domestic product grew 6.2% in the second quarter of 2019, the slowest quarterly growth rate since estimates began in 1992, and passenger car sales in China have declined on a year-over-year basis for 13 consecutive months. Most of China’s oil demand growth is now in petrochemicals, not transportation fuels.

These gasoline market developments represent a fundamental change in Asia and the global market. Before 2015, gasoline crack spreads in Asia were higher than gasoline crack spreads in other major market centers, particularly in the winter. As a result, U.S. Gulf Coast gasoline exports to Asia typically increased during the winter. Since 2016, however, Singapore gasoline crack spreads were increasingly the lowest of the major market centers at any time of the year (Figure 4). In addition, the recent closure of the Philadelphia Energy Solutions refinery in Philadelphia, Pennsylvania, will likely keep gasoline crack spreads in New York Harbor, Northwest Europe, and the U.S. Gulf Coast higher relative to Singapore. The difference in crack spreads signals the need for alternative sources of gasoline supply in the Atlantic Basin.

Figure 4. Number of days Singapore had the highest and lowest gasoline crack spread among global refining centers

A changing gasoline market in Asia has implications for U.S. gasoline markets. On the U.S. West Coast—a market that is very tightly balanced between supply and demand—increased availability of gasoline in Asia would mean the price of acquiring replacement supplies during a supply disruption would be lower. Whether Chinese refiners can produce gasoline that meets California’s strict environmental specifications, however, is uncertain. For U.S. refiners on the Gulf Coast, growing Chinese exports of gasoline may increase competition for the region’s 0.9 million b/d of gasoline exports in places such as the west coasts of Mexico and Central and South America.

U.S. average regular gasoline and diesel prices fall

The U.S. average regular gasoline retail price fell more than 6 cents from the previous week to $2.62 per gallon on August 12, 22 cents lower than the same time last year. The Midwest prices fell over 11 cents to $2.52 per gallon, the Gulf Coast price fell more than 6 cents to $2.32 per gallon, the East Coast price fell nearly 5 cents to $2.55 per gallon, the West Coast price fell more than 3 cents to $3.26 per gallon, and the Rocky Mountain price fell more than 1 cent to $2.69 per gallon.

The U.S. average diesel fuel price fell more than 2 cents to $3.01 per gallon on August 12, 21 cents lower than a year ago. The West Coast and Rocky mountain prices each fell nearly 3 cents to $3.58 per gallon and $2.94 per gallon, respectively, the East Coast and Gulf Coast prices each fell more than 2 cents to $3.03 per gallon and $2.76 per gallon, respectively, and the Midwest price fell nearly 2 cents to $2.92 per gallon.

Propane/propylene inventories rise

U.S. propane/propylene stocks increased by 3.2 million barrels last week to 86.5 million barrels as of August 9, 2019, 7.7 million barrels (9.8%) greater than the five-year (2014–18) average inventory levels for this same time of year. Gulf Coast, East Coast, and Midwest inventories increased by 2.5 million barrels, 0.6 million barrels, and 0.3 million barrels, respectively. Rocky Mountain/West Coast inventories decreased by 0.2 million barrels. Propylene non-fuel-use inventories represented 4.5% of total propane/propylene inventories.

Retail prices (dollars per gallon)

Conventional Regular Gasoline Prices Graph. On-Highway Diesel Fuel Prices Graph.
 Retail pricesChange from last
Gasoline 2.624 -0.064 -0.219
Diesel 3.011 -0.021 -0.206

Futures prices (dollars per gallon*)

Crude Oil Futures Price Graph. RBOB Regular Gasoline Futures Price Graph. Heating Oil Futures Price Graph.
 Futures pricesChange from last
Crude oil 54.50 -1.16 -13.13
Gasoline 1.674 -0.108 -0.365
Heating oil 1.808 -0.082 -0.332
*Note: Crude oil price in dollars per barrel.

Stocks (million barrels)

U.S. Crude Oil Stocks Graph. U.S. Distillate Stocks Graph. U.S. Gasoline Stocks Graph. U.S. Propane Stocks Graph.
 StocksChange from last
Crude oil 440.5 1.6 26.3
Gasoline 233.8 -1.4 0.6
Distillate 135.5 -1.9 6.5
Propane 86.509 3.206 16.727
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