Amidst news that Chinese purchases of US Crude will continue to balloon to historic levels throughout 2018, there is a different plot line in the story of refined products exports. Navarik’s proprietary data on scheduled cargoes predicts that March weekly refined product export volumes out of the US Gulf Coast will be down some 50% compared to outflows in February. While we are in the midst of spring refinery turnaround season, there are a few indications that this year’s maintenance periods will be longer.
Note the graph below, which reports refinery utilization rates in PADD 3. Historically, it’s around the start of March that utilization rates hit their lowest ebb and begin to recover throughout the month. Moreover, the typical utilization rate hit at this lowest ebb is remarkably stable when compared to the volatility throughout the rest of the year. Hints to this are the matching slopes of the minimum and maximum curves and the converge of the 5-year average with the previous year. If we note how current year utilization has been trending well above historical levels and remains high, it stands to reason that it has farther to fall to register the expected level. Redline an engine long enough and it will need some extra maintenance.
The open question however, is what effect the long shadow of Hurricane Harvey will have. The massive unplanned shutdowns due to the storm happened so close to fall turnaround season that some refinery operators may have had some room to fit in planned maintenance into the unplanned shutdown. Conversely, some may have been under such a grueling workplan to simply cope with the storm’s effects that they deferred other less-mission-critical routine maintenance which they will try and fit into this season. The breakdown in these two scenarios will determine the length of the March trough. With more than half the nation’s refining capacity located in this area, the length of this year’s spring maintenance will be crucial.
The EIA estimated that national clean product stocks would stay roughly unaffected when announcing their projections late last week. But a rough March and booming US economy could cut supply and inflate demand, eating into stocks and deviating from this rosy picture. Navarik’s suite of reports can provide forward guidance as to whether or not this situation develops, before the market – even before the cargoes ship.
Navarik’s team of analysts provide highlights gathered from the Navarik suite of reports. This highly validated set of data provides unique insight into the marine petroleum shipping market.
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