Retail diesel prices on the East Coast are soaring relative to the rest of the country, propelled by inventories in the region that are nearly half of what they would normally be at this time of year
Retail prices recorded in SONAR’s DTS dataset tell of the increase in the amount of diesel. On Sept. 16, retail diesel in Allentown, Pa., a major logistics hub, was $5.116 a gallon, while Houston’s price was $4.513 a gallon, a gap of just over 60 cents. . On October 15, Allentown was at $5.663 a gallon while Houston was at $4.70, a spread of 96.3 cents. On Thursday, Allentown was at $6.028 a gallon and Houston was at $4.70 a gallon, a gap of $1.328 a gallon.
The East Coast price surge was propelled in large part by the tight inventory situation in what is known as PADD 1, the Department of Energy’s designation for that region.
Weekly statistical data reported by the EIA this week had ultra low sulfur diesel inventories in PADD 1 at 21.3 million barrels for the week ended October 21, a drop of more than 7% in a single week. But most striking is the fact that these stocks are 56.5% of the five-year average for the corresponding October weeks, excluding data influenced by the 2020 pandemic.
By contrast, national inventories for all distillates, which are not broken down by specific grades, are around 80-81% of the five-year average, which analysts consider extremely tight.
Tight supply on the East Coast was also brought home this week by a supply alert issued by Mansfield Oil Co., a major wholesale fuel supplier to the East Coast and other parts of the country.
Mansfield, in a supply alert issued on Tuesday, said it was moving to a level 4 alert on diesel supplies. It was not immediately clear what is happening at Level 4, although it is less severe than the Level 5 alert he had put in place for Hurricane Ian. An email sent to Mansfield had not received a response at the time of publication.
The supply alert also said it was moving the southeast region to code red. Under Code Red, the company asks for “72 hours notice for deliveries where possible to ensure that fuel and freight can be secured at economical levels.” The step below, which was implemented for parts of the country during Ian, is code orange, asking for a 48-hour window.
East Coast supply squeeze data can be seen in other indicators. For example, data provided to FreightWaves by a third party shows that the spread between Brent crude and ultra-low sulfur diesel delivered by pipeline to Linden, New Jersey, published by S&P Global Commodity Insights, home to its Platts operations. , has recently been close to $85. at $87 a barrel. But that’s down from just a week ago, when it topped $100 for three straight days. A month ago it was around $50 a barrel.
Other price data, befitting a market in such turmoil, is everywhere. For example, Pilot Flying J publishes a downloadable system-wide retail price spreadsheet for over 830 outlets. And although prices there show the East Coast significantly higher than the Gulf Coast, the spreads are hardly consistent.
For example, on Friday morning, the Pilot Flying J outlet in Pasadena, Texas, a suburb of Houston, was listing a price of $5.199 per gallon. But in Staunton, Va., along Interstate 81, a key north-south route on the East Coast, prices were only 20 cents more than that. Head to 81 a bit further to Carlisle, PA, and a gallon of diesel would run you nearly $6.40.
Weekly data from the Energy Information Administration shows little difference between the East Coast and the nation as a whole, at just $5.341 a gallon nationwide versus $5.379 a gallon on the East Coast on Monday. East Coast numbers are integrated into the national number.
But the gap to the Gulf Coast was most recently 39.2 cents per gallon, with the Gulf still below $5 at $4.987 per gallon. This gap of almost 40 cents is not even the highest this year; it was well above 60 cents during a similar compression on the East Coast in May.
With those kind of margins, East Coast refiners – a dwindling breed – are rushing to take advantage – those who remain.
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PADD 1 refiners operated at 102.5% capacity in the week ended Oct. 21, the EIA said, a statistical oddity as refiners find ways to exceed design capacity. However, it is generally considered unsustainable for long periods of time.
But this rate of more than 100% is only recent; normal fall maintenance levels pushed that utilization rate to between 85% and 90% for five weeks starting in mid-September.
That’s also against an EIA-estimated base capacity of 818,000 barrels per day, up from 1.22 million barrels per day through mid-2020. But the region has been hit by several refinery closures in recent years, the most notable being the giant Philadelphia Energy Solutions refinery, which closed several months after a fire in 2019. It took 335,000 barrels per day of refining capacity off the east coast market.
The closure of the Come-by-Chance refinery in the Canadian province of Newfoundland in 2020 is not factored into the EIA figures for the East Coast. It is being replaced by a renewable diesel facility that will produce 18,000 barrels per day of this product, which can be consumed in diesel engines without further processing. But if the 133,000 barrel per day refinery was producing one-third diesel, which is a rough estimate for most refineries, that still represents a loss of almost 30,000 barrel per day of East Coast diesel supply. .
The facility to replace Come-by-Chance is called Braya Renewable Fuels and is not yet in commercial operation.
The irony in the tight market is that there are signs of falling demand. The EIA’s most recent figure for the product supplied, its demand indicator, showed that all distillate consumption in the week ending Oct. 21 was 3.87 million barrels per day. This is the first week at less than 4 million barrels per day in four weeks, although demand has been below that 4 million figure for 24 of the previous 25 weeks.
But EIA data typically has the third week of October over 4 million barrels per day as it comes in the middle of the harvest season and consumers using fuel oil fill their tanks in anticipation of winter. . Heating oil, like diesel, is a distillate and the weekly data does not break down the different types of fuel in the number of products supplied.
By FreightWaves through Zerohedge.com
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