Since our last newsletter, we witnessed the GI & GII and some GIII postings space move during late February, March, and April 1st, for one key GII refiner. These increases ranged from 15-20 cpg$. As of this writing we are now seeing the GI & GII space announce further price increases within the 30-40 cpg$ range as we wait for others to follow. Big Blue opted out of the first round of postings increases in Feb/March and we have not heard any news as to today’s position. We will report as we learn from others as well.
All Refiners are claiming that Crude, NG and VGO Feedstocks are on the rise. And they are correct. Since Mid-March, Crude is up another 9.8%. VGO is up another 8.35% while Natural Gas is up 8.7%. ULSD creeped up another 4% on the lag. And let us not forget our ULSD alternate competitor within the refinery as well. So, when ULSD garners more profit, it is given more VGO feedstock until Base Oils improves their profit stream. It is one of the internal battles that is constantly in play.
These verifiable production cost pressures are bubbling up within all the refining sectors. 3:2:1 Crack spreads have dropped by another 4.5% since March 15th adding more pressure to the assault on refinery margins. Nobody likes a price increase but based on the indexes, these moves are not willy nilly.
Buyers know very well that demand has been muted with a few bright spots along the way during 4th QTR “23” and Jan-Feb “24” with March showing an increase in buys supporting the Summer Swing. The question here is; “Will the buyers work from the middle of the tank or the top of the tank?” Keep in mind that pricing does has an upward bias at the moment.
Many blenders are asking why are we seeing these increases while demand issues and supply overhangs exist? Refiners have been working since late last year to reduce the overhang and have done a pretty good job of it. Think in 90-to-120-day cycles. That is the lead lag effect on refinery activities. So, they have been working for some time to remedy the overhang.
GII Spot & Spot Exports have nicely cleared up much of the overhang so much so, GII Export prices have moved up narrowing the arbitrage for the first time in the last few weeks vs nearly 9 months of declining prices. This suggesting that Refiners have less Export Spot barrels while placing more focus on Domestic Term accounts. This matches the recent buyer sentiment and buying activities.
For some refiners we are hearing the word “Balanced” more often in the GI and GII space. But what about GIII.
GIII markets are seeking supply and pricing normalcy. Recent news suggests an increase in the GIII imports for April/May. This makes sense as we see 3 major GIII refiners going into a maintenance cycle during April with one lasting over 9 weeks. The inventory buildup now makes more sense helping to shore up supply during this time. The pressure points are that Buyers need to forecast as suppliers are managing tanks closely until the refineries come out of their maintenance and the replenishment supply starts working its way through the supply chain. Price wise we have seen suppliers right side pricing in the markets while GIII demand has picked up steadily. We suspect that when the Asian and European markets improve, GIII pricing stability with grow more firm.
Once again, we are in a very dynamic industry. Always here and everywhere something is happening that impacts our world and supply chain. We deeply appreciate the opportunity to work with you and helping our customers navigate the waters ahead.
RECENT HEADLINES
US Refineries
Chevron Leaves Myanmar
U.S. supermajor Chevron has quit operations in Myanmar by transferring its stake in a natural gas field and an associated pipeline to its former partners in the ventures, after pledging to leave the Southeast Asian country following a military coup in 2021. “The withdrawal gives effect to our intention to exit Myanmar in a controlled and orderly manner, following the February 2021 coup, and ongoing humanitarian crisis,” a spokesperson for Chevron has told Reuters. Chevron pledged in 2022 to exit Myanmar. In February 2023, the U.S. oil and gas giant said it had agreed to sell its assets there. The international community has imposed sanctions on Myanmar and the junta currently in power.
https://oilprice.com/Latest-Energy-News/World-News/Chevron-Leaves-Myanmar.html
U.S. Petroleum Product Exports Set Another Record High in 2023
Petroleum product exports from the United States averaged a record 6.1 million barrels per day (b/d) in 2023, a 2.5% increase from 2022, according to the EIA’s Petroleum Supply Monthly. Propane drove the growth in U.S. petroleum product exports, offsetting decreases in gasoline and distillate exports. Growing 14% in 2023, U.S. propane exports averaged 1.6 million b/d in 2023, establishing an annual record high. Propane exports made up 26% of all U.S. petroleum product exports, more than any other petroleum product. Propane is consumed globally for space heating and is increasingly used as a petrochemical feedstock in East Asia. Propane consumption as a petrochemical feedstock has been driven by propylene production in East Asia. Propylene is a base chemical used to manufacture polypropylene, a fiber used to make car interiors, packaging, and personal protective equipment.
NON-US Refineries
Mexico Set to Slash Oil Exports by Over 300,000 Bpd in May
Mexico is planning to cut the amount of crude oil it exports by 330,000 barrels daily next month as it redirects supply to local refineries. The volume to be cut represents a third of the total that Mexico sells abroad, Reuters noted in a report, which also said 330,000 bpd is the minimum that will get redirected from overseas market to local refineries. This month, Pemex slashed oil exports by 436,000 barrels daily as Mexican refineries ramp up, including the new Dos Bocas facility, which will take in some 179,000 bpd this year. The refinery’s nameplate capacity is 340,000 barrels daily.
Chinese Oil Demand Is Entering Era of Low Growth, CNPC Says
China’s oil demand has entered a low-growth phase as decarbonization starts to eat into consumption of fossil fuels, the country’s biggest energy producer said. Greater take-up of electric vehicles, as well as trucks powered by liquefied natural gas, will replace about 20 million tons, or 10% to 12% of the country’s gasoline and diesel consumption this year, said Lu Ruquan, president of China National Petroleum Corp’s.
THE CRUDE SIDE
Top Commodity Trader Sees Oil in $80-$100 Range This Year
Oil prices are set to trade in the range between $80 and $100 per barrel this year, Russell Hardy, chief executive at the world’s largest independent oil trader, Vitol Group, said at an industry conference on Tuesday. Vitol also expects robust global oil demand growth in 2024, at around 1.9 million barrels per day (bpd) higher than in 2023, Hardy told the audience at the FT Commodities Global Summit in Lausanne, Switzerland. Oil prices jumped to above $90 per barrel last week—their highest level so far this year and the highest in nearly six months – after tensions resurfaced again in the Middle East and the OPEC+ alliance did not make any changes to the ongoing oil production cuts, leaving them as-is until the end of the first half of the year.
The Odds of $100 Oil Are Rising as Supply Shocks Convulse the Market
When oil jumped above $90 a barrel just days ago, military tensions between Israel and Iran were the immediate trigger. But the rally’s foundations went deeper — to global supply shocks that are intensifying fears of a commodity-driven inflation resurgence. A recent move by Mexico to slash its crude exports is compounding a global squeeze, prompting refiners in the US — the world’s biggest oil producer — to consume more domestic barrels. American sanctions have stranded Russian cargoes at sea, with Venezuelan supply a potential next target. Houthi rebel attacks on tankers in the Red Sea have delayed crude shipments. And despite the turmoil, OPEC and its allies are sticking with their production cuts.
SUGGESTED READING
Are you curious about ChatGPT but don’t know how to get started?
Do you want to understand ChatGPT in simple terms?
Do you want to know how ChatGPT can help the average person?
Start your journey into the exciting world of artificial intelligence with “A ChatGPT Guide for Beginners: What It Does, How It Does It, and Why You Should Use It” – a comprehensive guide to mastering ChatGPT, the groundbreaking AI tool.
WE’VE COME A LONG WAY!
The Signal Fluid Solutions team would like to take this time to thank you for your business and thank you for allowing us to be an important part of you supply team.
