1. Frac sand miners drowning in supply
- The share prices of frac sand miners have plunged by more than 70 percent over the last two years, as a wave of new supply has hit the market all at once.
- Bloomberg reported that one company, Shale Support LLC, has started to export frac sand to Argentina, a move that boosted profits by 20 percent.
- But that is a relatively small market. For now, U.S. sand miners are battered because supply has grown by 50 percent in the last three years. In 2019, supply is expected to rise to 229 million tons, while demand will only reach 123 million tons, according to Bloomberg and Rystad Energy.
- Many new mines have opened in Texas, close to drilling operations. The older mines from Wisconsin are now struggling to stay afloat.
- One company, Covia, has shut down 7 million tons of supply, the largest volume out of any other company, according to Bloomberg and Evercorse ISI.
2. U.S. refiners ramp up
- Refinery runs averaged 17.3 mb/d in 2018, the highest annual average on record and the fifth consecutive year that the industry broke a new record, according to the EIA.
- One of the reasons for higher throughputs is the high margins for diesel, an attractive incentive for refineries to ramp up processing. Gasoline margins have been depressed, but diesel is much more profitable.
- As refiners chase diesel, they have exacerbated the glut of gasoline since…