General index, Crude Oil Data

Global Market Analysis, 27 May 2022

This week's analysis comes from the US as our Refined Products Pricing Director, Jeffrey Bair, takes a look at bullish summer signs for US fuels in North America.

Temperature rising on US fuels markets ahead of summer season start

By Jeffrey Bair

Bullish summer signs for US fuels are coming forward much earlier than last year, independent of what could also be a busy hurricane season along the Gulf of Mexico refining hub.

Gasoline flow from Northwest Europe into the US East Coast, traditionally a sweet spot in the Atlantic Ocean arbitrage, is likely to hit 10mn bl once May is done, marking a 27% increase from May 2021, Kpler data shows.

Also rising: seasonal gasoline flow into the West Coast and demand for jet fuel, both according to Energy Information Administration data.

Products markets watchers are looking for the first “normal” summer of the pandemic. The last two summers delivered demand destruction from the coronavirus and the Colonial pipeline ransomware interruption.

Seasonally stronger flow from Europe is happening even with gasoline stockpiles rising along the East Coast and the Colonial Pipeline arbitrage improving.

General Index, NY Jet VS Diesel

Trade in pipeline line space is improving in gasoline markets with Colonial scheduled full toward midsummer, and diesel line space is trading positive for the first time in months. Buying access to the line carrying ULSD and jet, Line 2 across the South toward New York, cost about 2 c/gal this week. Value was negative last week.

More good news for margins: Premium gasoline on Colonial is trading wholesale at about 50 c/gal over regular, perhaps 20 cents over norms. The spread is bumping up retail premium gasoline nationwide and attracting to the states of high-octane alkylate from South Korea and India, General Index and Kpler data show.

The West Coast is bringing in about four cargoes a week of all kinds of gasoline, double normal flow.

In distillates, the moving average for US jet fuel demand, as reflected by product supplied, has topped 1.5mn bl a day for five straight weeks through 20 May. The last time a run like that happened was in March-April 2020, right at the pandemic’s start.

General Index, US Jet Demand

Any summer plot line could be told by the steamy South Atlantic and Gulf of Mexico. Federal government forecasters are calling for three to six major hurricanes across the summer into early fall and an above-normal hurricane count. Gasoline and diesel prices could extend records they set ahead of the traditional peak travel season.

Monday, the US Memorial Day holiday, marks the start of summer travel with families heading toward the beaches and mountains by the tens of thousands.

Zulfadhli Kader
Jeffrey Bair, Pricing Director, Americas Refined Products
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