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Global Market Analysis, 02 December 2022

This week's Global Market Analysis comes from America, and gives insight into the current pushes being made across US refineries to increase utilisation.

US refinery utilisation tops 95%, boosting sought-after diesel supply and trimming prices

By Jeffrey Bair

Managers at US refineries have been pushing the equipment harder than they have at any time since several months before the coronavirus pandemic.

In the most recent reporting week, the one ending 25 November, the federal government EIA in its Wednesday report placed refinery utilisation at 95.2%. That marks five straight weeks of increases and indicates the highest level for refinery runs since 23 August, 2019.

General index, Refinery Utilisation

The situation is manifesting itself on two fronts. One, retail tracker Gas Buddy says the national average price for gasoline is dropping quickly toward $3 a gallon and could hit that threshold in the next few months. Gasoline has consistently have fallen from the levels at the same time in 2021. Diesel prices assessed by General Index have fallen to the lower end of 2022 levels in recent weeks.

General Index, ULSD

Two, traders are scrambling to scoop up the extra supply. In half an hour Tuesday, BP agreed to buy 350,000 barrels of diesel, enough to fill a medium-range tanker with some fuel left over. OilX expects diesel/gasoil output by US refiners to reach 5.284mn b/d in December, the highest since June 2019.

oilX, Gasoil Diesel Refinery

Supporting this story line is the recent gain in trade of both Colonial Pipeline gasoline and diesel pipeline capacity. Traders have been paying an extra 15 cents a gallon or more for either after both values were in single digits or negative early this year, General Index data show. Market makers are seeking to move the cheaper product eastward and northward on the Colonial system to sell it in areas that might need fuel.

Helping refinery runs has been the absence of any catastrophic refinery failures this year. The oil-producing sector of the Gulf Coast was spared visits from any major hurricanes.

To be sure, not all markets are flush. The East Coast north of New York is running short on ULSD, while Chicago value on all products remains extremely volatile.

Jeffrey Baird, U.S. Refined Products Pricing Director
Jeffrey Bair, Pricing Director, Americas Refined Products
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