European Distillate Refining Margins Have Slipped
September 24, 2020
European gas oil (diesel) refining margins have slipped well below $3 per barrel (based on futures prices for deliveries before the end of the year), probably not enough to cover their full costs (energy, catalysts, services, labor, and capital), indicating refineries are likely to reduce crude processing and some are likely to close permanently. Per John Kemp: Reuters.
DOE inventory report said that crude oil stock were down 1.64 million barrels which was less than the expectations. Crude oil stocks at Cushing, Ok were unchanged. Gasoline stocks were down 4.03 million barrels and distillates were down 3.36 million barrels. The bigger draws to products was supportive to prices.
Total crude oil stocks are at 494.406 million barrels and are 74.868 million more than last year at this time. Cushing total crude stock are at 51.281 million barrels and are 13.344 million more than last year.
Total gasoline stocks are at 227.499 million and that is 2.705 million less than last year. Midwest stock are at 46.498 million which is 4.211 million less and below the 3 year average. This fact has gotten some press in the last few days and may add some bullishness to gasoline prices.
Also helping gasoline price support was a rise in implied demand which was up by 37,000 bpd but is still below the 10 year mean due to the impact of the pandemic. Implied demand for diesel was also higher up 1.150 million bpd and it has now move above the 5 year mean for this time of year. Diesel demand is going to need to continue strong to reduce the overhang of supplies. Refiners are doing what they can to limit diesel production and are exporting all they can to try and whittle down the surplus. It is going to just take time to work supply and demand back into a closer balance.
Propane inventory built by 1.749 million barrels putting total stocks at 97.890 million barrel which is 2.255 million more than last year at that time. Midwest stocks built by 111,000 barrels putting Midwest stocks at 27.445 million barrels which is 507,000 more than last year. Gulf Coast stocks built by 902,000 barrels putting total stocks at 55.851 million barrels which is 614,000 barrels less than last year.
The Fed has indicated that the economy needs more stimulus but as of now congress is deadlocked on any addition monies.
The UK, Germany, and France have imposed new restriction to try and lessen the rising COVID-19 cases and this will likely have a negative impact on energy demand.