• 40 mins Aramco In Talks With Chinese Petrochemical Producers
  • 2 hours Federal Judge Grants Go-Ahead On Keystone XL Lawsuit
  • 3 hours Maduro Names Chavez’ Cousin As Citgo Boss
  • 10 hours Bidding Action Heats Up In UK’s Continental Shelf
  • 15 hours Keystone Pipeline Restart Still Unknown
  • 19 hours UK Offers North Sea Oil Producers Tax Relief To Boost Investment
  • 21 hours Iraq Wants To Build Gas Pipeline To Kuwait In Blow To Shell
  • 23 hours Trader Trafigura Raises Share Of Oil Purchases From State Firms
  • 1 day German Energy Group Uniper Rejects $9B Finnish Takeover Bid
  • 1 day Total Could Lose Big If It Pulls Out Of South Pars Deal
  • 1 day Dakota Watchdog Warns It Could Revoke Keystone XL Approval
  • 2 days Oil Prices Rise After API Reports Major Crude Draw
  • 2 days Citgo President And 5 VPs Arrested On Embezzlement Charges
  • 2 days Gazprom Speaks Out Against OPEC Production Cut Extension
  • 2 days Statoil Looks To Lighter Oil To Boost Profitability
  • 2 days Oil Billionaire Becomes Wind Energy’s Top Influencer
  • 2 days Transneft Warns Urals Oil Quality Reaching Critical Levels
  • 2 days Whitefish Energy Suspends Work In Puerto Rico
  • 2 days U.S. Authorities Arrest Two On Major Energy Corruption Scheme
  • 3 days Thanksgiving Gas Prices At 3-Year High
  • 3 days Iraq’s Giant Majnoon Oilfield Attracts Attention Of Supermajors
  • 3 days South Iraq Oil Exports Close To Record High To Offset Kirkuk Drop
  • 3 days Iraqi Forces Find Mass Graves In Oil Wells Near Kirkuk
  • 3 days Chevron Joint Venture Signs $1.7B Oil, Gas Deal In Nigeria
  • 3 days Iraq Steps In To Offset Falling Venezuela Oil Production
  • 3 days ConocoPhillips Sets Price Ceiling For New Projects
  • 6 days Shell Oil Trading Head Steps Down After 29 Years
  • 6 days Higher Oil Prices Reduce North American Oil Bankruptcies
  • 6 days Statoil To Boost Exploration Drilling Offshore Norway In 2018
  • 6 days $1.6 Billion Canadian-US Hydropower Project Approved
  • 6 days Venezuela Officially In Default
  • 6 days Iran Prepares To Export LNG To Boost Trade Relations
  • 6 days Keystone Pipeline Leaks 5,000 Barrels Into Farmland
  • 6 days Saudi Oil Minister: Markets Will Not Rebalance By March
  • 7 days Obscure Dutch Firm Wins Venezuelan Oil Block As Debt Tensions Mount
  • 7 days Rosneft Announces Completion Of World’s Longest Well
  • 7 days Ecuador Won’t Ask Exemption From OPEC Oil Production Cuts
  • 7 days Norway’s $1 Trillion Wealth Fund Proposes To Ditch Oil Stocks
  • 7 days Ecuador Seeks To Clear Schlumberger Debt By End-November
  • 7 days Santos Admits It Rejected $7.2B Takeover Bid
Alt Text

Oil Prices Nosedive On Bearish IEA Report

Oil prices are cratering after…

Alt Text

The IEA Is Grossly Overestimating Shale Growth

The IEA’s forecast that U.S.…

Alt Text

Short Bets On Oil Spike Ahead Of OPEC Meeting

Short positions in Brent futures…

Nick Cunningham

Nick Cunningham

Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

More Info

European Refiners Set To Benefit From Gulf Coast Chaos

Refinery

The refinery outages from Hurricane Harvey have left a very large, if temporary, void in the refined product supply, a space set to be filled by refiners located far from the flood ravaged coast of Texas.

European refiners stand to benefit from the disruptions, as a sudden shortfall in refined products has led to a surge in margins. European refiners are expected to ramp up capacity and exports to fill the gap, enticed by surging prices. Crack spreads for European gasoline are at a two-year high, according to PVM Oil Associates, and at a record high for this time of year.

According to Bloomberg, oil traders booked 20 tankers from European suppliers since August 26, double the average for August. Reuters put the figure at 40 tankers, carrying 1.5 million tonnes of gasoline, or about triple the normal rate.

“With sharply rising flows from Europe to the U.S. Gulf, we’re also seeing a massive spike in crack spreads,” Carsten Fritsch, an analyst at Commerzbank AG, told Bloomberg in an interview. “It depends on how long the refinery closures will remain in place. As long as this is the case flows will continue and crack spreads look well supported.”

Goldman Sachs said in a research note that refiners along the Texas and Louisiana coast, including Marathon Petroleum, ExxonMobil, Phillips 66 and Valero Energy have seen interruptions and potential damage to their refining assets, although the full extent of the damage is unknown at this point. However, refiners such as HollyFrontier Corp., PBF Energy, and Andeavor stand to benefit in the short run, as they are unaffected by the hurricane and will be able to sell their refined products at much higher prices.

Related: Oil Prices Rise As Texas Braces For Hurricane Harvey Landfall

JBC Energy goes further, saying that refiners in the Midwest and East Coast will see “windfall profits as they try to fill the gap left by Gulf Coast refiners, with cracks continuing to soar.” The same goes for European refiners.

The ultimate destination for a lot of gasoline and diesel coming out of Europe might not be what many would expect at first glance.

In Texas, the sudden outage of gasoline will be less of an issue because the region is so devastated that few people are driving. So European exports won’t be heading there.

The East Coast of the U.S. could avoid supply disruptions for the time being because of adequate storage. The Colonial Pipeline, the crucial artery that carries Gulf Coast gasoline to the Mid-Atlantic and Northeast, is running well below capacity because very little fuel is coming from Gulf Coast refineries. So, the Eastern Seaboard will start to feel those effects if the outages persist, but in the near-term, there probably won’t be any major disruptions or price spikes.

Instead, gasoline from Europe will be sent to Mexico, which relies on imports from the U.S. for a large portion of its fuel supply. As a result, Mexico and other parts of Latin America could be hard hit by the hurricane outage.

The problem for Mexico is compounded by the fact that production from state-owned Pemex has been in decline for years, making the country much more dependent on its northern neighbor. Moreover, Pemex’s refineries have been down lately, putting refining capacity at many of its facilities its lowest rate since 1990. Bloomberg says that about 72 percent of Pemex’s gasoline sales in July came from imported fuel.

“Imports will be diverted away from the East Coast to supply Mexico,” Robert Campbell, head of oil-products research for Energy Aspects Ltd., told Bloomberg “Mexico takes about 400,000 to 500,000 barrels a day of gasoline from the U.S.” he said, while adding, “Now they’ve got to source those barrels from somewhere else.” Related: The Slow Death Of Nuclear Power In Europe

But other countries also purchase refined products from the United States. Venezuela, for example, buys lighter forms of oil in order to dilute its own heavy oil. Much of Venezuela’s imported diluents come from the U.S. Gulf Coast.

“Not only Mexico but the rest of Latin America would be competing for those barrels,” Ixchel Castro, senior analyst at energy consultant Wood Mackenzie in Mexico City, said in a Bloomberg interview. “The longer the stoppage in the Gulf, the greater international competition for obtaining the barrels and higher prices in the European market.”

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News