EIA: This Week in Petroleum - 3 April 2019 - eng ^{Избранное}

Panama Canal expansion increased transits of hydrocarbon gas liquids without much change in other petroleum flows

In June 2016, the Panama Canal Authority, the body that operates the Panama Canal, opened a third set of locks that facilitated transit of larger ships, the first such expansion since the canal was completed in 1914. In the years since the canal was expanded, however, the only significant change in petroleum flows through the canal has been the increase of hydrocarbon gas liquids (HGL) from the U.S. Gulf Coast to destinations in Asia. Other petroleum flows through the canal including U.S. Gulf Coast exports of distillate and motor gasoline to destinations on the West Coast of Central and South America have changed little since the expansion.

Most of the petroleum transiting the Panama Canal travels southbound from the Atlantic Ocean to the Pacific Ocean. Flows of HGL are the largest single petroleum commodity according to data from the Panama Canal Authority. In 2018, approximately 387,000 barrels per day (b/d) of HGL transited southbound through the Panama Canal, followed by 266,000 b/d of distillate, and 230,000 b/d of motor gasoline (Figure 1).

Figure 1. Petroleum flows through Panama Canal

Before 2016, the main constraint for increasing U.S. exports of HGL to meet growing demand in Asia was export infrastructure on the U.S. Gulf Coast. By 2016, more export infrastructure was added, with the size limitations of the original Panama Canal locks and the costs associated with alternative shipping routes as the remaining constraints for increased exports.

The largest and most economical way of transporting large volumes of HGLs by water is via Very Large Gas Carriers (VLGC). The most economical route from the U.S. Gulf Coast—where the most of U.S. HGL export capacity is located—to Asia is through the Panama Canal. However, most VLGCs were too large to transit the original set of Panama Canal locks. This size constraint, combined with the costs and longer voyage times of alternative routes, resulted in ship-to-ship transfers in the waters around the canal for U.S. exports of propane headed to Asia.

After the canal’s expansion, VLGCs can now transit the larger set of canal locks resulting in an approximate 173% (293,000 b/d) increase in southbound canal transits of HGL cargoes from 2016 to 2017. This growth coincided with an increase in exports of HGL from the U.S. Gulf Coast, or Petroleum Administration for Defense District (PADD) 3, to destinations mostly in Asia. These increased exports likely transited the Panama Canal. In 2018, four of the five largest destinations for U.S. Gulf Coast exports of HGL were in Asia, with Japan being the largest at 280,000 b/d (Figure 2).

Figure 2. PADD 3 hydrocarbon gas liquids exports and destinations

Aside from HGL flows, large portions of the southbound Atlantic-to-Pacific petroleum shipments through the Panama Canal are related to export flows from the U.S. Gulf Coast to destinations on the West Coast of Central and South America, such as El Salvador, Ecuador, Peru, and Chile. In 2018, the U.S. Gulf Coast exported 210,000 b/d of distillate to these four destinations. Since these flows likely transited the canal, they represent about 79% of the 2018 southbound distillate canal flow. Although the U.S. Gulf Coast exports some HGL to these four destinations, these volumes (71,000 b/d) accounted for just 18% of total southbound canal flows for HGL in 2018. For motor gasoline, the U.S. Gulf Coast exported a total of 60,000 b/d to El Salvador, Ecuador, Peru, and Chile in 2018; this total represented a little more than one-quarter of all southbound motor gasoline canal traffic for the year (Figure 3).

Figure 3. PADD 3 exorts to Chile, Ecuador, El Salvador, and Peru

Despite accounting for large shares of the petroleum that transits the Panama Canal, U.S. Gulf Coast exports of petroleum to El Salvador, Ecuador, Peru, and Chile account for a small share of total Gulf Coast exports. Exports to the four countries combined account for 18% of total PADD 3 distillate exports, 7% of total motor gasoline exports, and only 6% of total HGL exports.

Although U.S. crude oil exports have been increasing, up to 2 million b/d in 2018, the most commonly used vessels to transport crude oil are too large to use the Panama Canal. This restriction will likely limit flows of crude oil to destinations such as Chile and Peru that received a combined 19,000 b/d of U.S. crude oil in 2019. Instead, increasing crude oil exports are more likely to go to destinations in Asia via the Suez Canal or around the southern tip of Africa and to destinations in Europe using trans-Atlantic routes.

Future petroleum flows through the Panama Canal are likely linked to expanding petrochemical demand for HGL in Asia; economic growth in El Salvador, Ecuador, Peru, and Chile; and continued growth in U.S. petroleum product exports.

U.S. average regular gasoline price increases, diesel price decreases

The U.S. average regular gasoline retail price rose nearly 7 cents from the previous week to $2.69 per gallon on April 1, down nearly 1 cent from the same time last year. The West Coast price rose over 12 cents to $3.27 per gallon, the Rocky Mountain and Gulf Coast prices each rose nearly 7 cents to $2.47 per gallon and $2.45 per gallon, respectively, the Midwest price rose over 6 cents to $2.63 per gallon, and the East Coast price rose over 5 cents to $2.62 per gallon.

The U.S. average diesel fuel price fell less than 1 cent, remaining at $3.08 per gallon on April 1, nearly 4 cents higher than a year ago. The East Coast and Midwest prices each fell nearly 1 cent to $3.13 per gallon and $2.98 per gallon, respectively, and the Gulf Coast price fell less than 1 cent to $2.87 per gallon. The Rocky Mountain price increased over 3 cents to $3.01 per gallon, and the West Coast price increased nearly 2 cents to $3.54 per gallon.

Propane/propylene inventories rise

U.S. propane/propylene stocks increased by 1.6 million barrels last week to 53.2 million barrels as of March 29, 2019, 8.3 million barrels (18.4%) greater than the five-year (2014-2018) average inventory levels for this same time of year. Gulf Coast and Midwest inventories increased by 1.6 million barrels and 0.1 million barrels, respectively. East Coast inventories decreased by 0.1 million barrels, and Rocky Mountain/West Coast inventories decreased slightly, remaining virtually unchanged. Propylene non-fuel-use inventories represented 11.8% of total propane/propylene inventories.