Phillips 66 Expects Fuel Supply to Be Tight This Summer
January 9, 2023
Phillips 66 expects supplies of gasoline and diesel to be tight this summer. Jeff Dietert, a Phillips 66 vice president said globally, there has been a loss of about 4.7 million bpd of processing capacity. Less capacity have driven up refiner’s margins and utilization rates as demand recovered. He said, “As we approach the summer driving season, we expect gasoline and diesel to be tight again this summer.” Lyondell Basell Industries’ 263,776 bpd Houston refinery is scheduled to close by the end of this summer, further reducing US capacity. The loss will be mitigated by the planned expansion of Exxon Mobil Corp’s Beaumont, Texas, refinery’s coming online. It could add about 250,000 bpd capacity. Meanwhile, Phillips 66 Chief Executive, Mark Lashier, said the Houston-based company is working to better integrate its seven US refineries.
The Baker Hughes Rig Count Report called crude oil rigs down 3 to a total of 618. Last year at this time there were 481 oil rigs in operation.
The chief executive of top shale producer Pioneer Natural Resources, Scott Sheffield, said OPEC will likely take steps to increase oil prices. He said, “Saudi is not going to let Brent stay around $75 dollars per barrel.” He added “It wouldn’t surprise me if they had another cut.” He said future oil prices, often referred to as “the strip” will likely stay in backwardation going forward, with current prices higher than futures contracts.
US manufacturers reported business activity declined for the second month in December and the sector appears to be on the leading edge of a recession. The Institute for Supply Management’s manufacturing activity index fell to 48.4 in December compared with 49.0 in November. The index has fallen in nine of the last 12 months as the business cycle has slowed under the impact of faster inflation, higher interest rates, high inventories, and post-pandemic rotation from goods to services spending.
The US government rejected all bids for February delivery into the Strategic Petroleum Reserve. The government had announced hopes to add 3 million barrels to the reserve but apparently there were issues with the price and/or the oil grades offered.
Crude oil prices are trading higher in early trading this morning with support stemming from optimism on China’s reopening and a fresh batch of Chinese crude imports. China plans to open their borders to travelers for the first-time tin there year with no quarantine and this is spurring the energy market higher on the hope of increased demand.