apparent demand

U.S refiners have been processing a lot of crude so far this summer and utilization rates remain high. Crude production has leveled off and is expected by the Energy Information Administration’s (EIA) Short Term Energy Outlook to decline slightly during the second half of 2015. But the early summer market sentiment that drove crude prices up to $60/Bbl on the back of these fundamentals appears to have lost steam. Today we conclude our analysis of short term crude price prospects.

While many companies in the energy sector – particularly in the producer community – are licking their wounds and reporting lower profits and reduced capital expenditure to their stockholders this quarter, refiners have continued to thrive. Lower refined product prices have begun to increase domestic consumption of gasoline and diesel in the face of longer-term decline trends. And strong refining margins continue to encourage high levels of refinery utilization. Today we start a two-part look at how U.S. refiners are faring after the oil price crash.

Increased refined product exports from US Gulf refineries are being driven by diesel refining margins but a lot of by-product gasoline is being produced as a result.  Domestic demand for diesel and gasoline has declined over the past 5 years. Fortunately for refiners there is strong demand for diesel and gasoline in Latin America as well as for diesel in Europe. Important cost advantages stemming from the shale revolution are helping Gulf Coast refiners secure these markets against international competitors. Today we conclude our analysis of booming Gulf Coast exports.

NYMEX Gasoline futures closed down two cents at $2.62/Gal today. The NYMEX gasoline contract is now down 23 percent since the middle of March. Refiners on the East Coast are heading for the exits. Will gasoline demand recover this Summer?  In today’s blog “No Apparent Demand – US Gasoline Thirst Evaporates” we take a closer look at the fundamentals.