US Market and Refinery Operations - November 2016

Source: OPEC 12/5/2016, Location: North America

US gasoline demand stood at around 9.1 mb/d in October, approximately 240 tb/d lower than in the previous month and more than 150 tb/d lower than in the same month a year earlier.

Despite seasonally lower gasoline demand following the end of the driving season, gasoline margins strengthened during October on the back of tightening sentiment, fueled by several factors. A heavy refinery maintenance season amid concerns about the potential impact of hurricane Matthew and limited capacity on the Colonial Pipeline contributed to tightening in the gasoline market. Additional support came from increasing exports to Latin America amid falling inventories.

The gasoline crack spread gained more than $1 compared with the previous month’s level to average $20/b in October.

Middle distillate demand stood at around 4.1 mb/d in October, more than 450 tb/d higher than in the previous month and around 80 tb/d higher than in the same month a year earlier. The middle distillate market continued receiving support from higher export opportunities to Latin America, which, along with the sharp increase seen in domestic demand, amid a heavy maintenance season, allowed inventory levels to reverse the trend from previous months. They dropped by around 10 mb , thus easing the overhang and fueling tightening sentiment with the onset of the winter season. The USGC gasoil crack spread averaged around $9.4/b in October, gaining almost $1 from the previous month.

At the bottom of the barrel, the fuel oil market weakened during October due to slower domestic demand amid pressure coming from the supply side with increasing volumes of high sulfur fuel oil (HSFO) arriving at the USGC from Europe and rising inventories. The USGC HSFO crack dropped by more than $1 to average minus $9/b in October. Meanwhile, low-sulfur vacuum gasoil (VGO) demand picked up for use as secondary feedstock due to heavy distillation unit maintenance in the region.


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