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Crude markets lag on IMO change: PBF

  • Market: Crude oil, Oil products
  • 01/08/19

Heavy refiners have yet to see crude prices reflect a shrinking market for sulfurous products, US independent refiner PBF Energy said today.

The company still expects to take advantage of cheaper sour feedstocks in the second half of the year as the global marine fuels market moves to a lower-sulfur standard. The International Maritime Organization (IMO) will require on 1 January 2020 that marine fuels move to 0.5pc sulfur emissions, down from the current 3.5pc sulfur.

US complex refiners such as PBF expect that change to make higher-sulfur components blended into the marine fuel market today compete with sour crudes for space in their facilities. PBF Energy can move more than 50,000 b/d of resid directly into its crude and coking units, the company said today.

But while higher sulfur and low sulfur fuel oil prices have begun to shift in the second half of this year to account for the marine fuel changes, the spread between light and traditionally sour heavy crudes has not budged.

"The product markets, from our view, are definitely way ahead of the crude market, as it relates to IMO," senior vice president of supply Tom O'Connor said. "Crude markets are very much torn between the narrow light-heavy environment that we are in today and are definitely undervaluing the crude slate changes that are pending on the horizon as we go into an IMO world."

The company had lowered its outlook for ultra-low sulfur diesel (ULSD) demand associated with the change, in line with other US refining peers. Initial outlooks had expected the 15ppm diesel fuel to make a costly but reliable blendstock for the first years of the marine fuel transition.

But refiners have instead increasingly used vacuum gasoil (VGO) diverted from gasoline-producing fluid catalytic cracking (FCC) units to supply components for the lower sulfur marine fuel. The strategy would tie marine fuel demand to both the diesel and gasoline markets, chief executive Tom Nimbley said.

"Gasoline gets sloppy, you just take gasoil out of the FCC and maybe sell it as a 0.5pc compliant fuel," Nimbley said. "I think there are going to be a number of knobs that turn and we will be supplying the fuel in different ways."

PBF still expected to take advantage of complex refining capacity in the near future. But heavy and sour crude processing fell in the second quarter amid maintenance and poorer margins. Light crude processing accounted for 26pc of the overall PBF crude slate, its highest level since the second quarter of 2016.

The refiner imported 75,000 b/d of heavy Canadian crude to its 190,000 b/d refinery in Delaware City, Delaware, during the second quarter. Railed crude imports would fall to 55,000-60,000 b/d in the third quarter. An unexpectedly long 40-day turnaround project on a Delaware City coker cut second quarter heavy throughputs.

PBF has no more planned maintenance for 2019.

PBF Energy 1Q crude throughput estimates
3Q 2019 Estimated3Q 20182Q 2019
Refining throughput ('000 b/d)
US East coast350-370355326
US Midcontinent155-165172163
US Gulf coast170-180196201
US West coast170-180166164

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Osaka, 17 February (Argus) — Japan's economy expanded for a fourth consecutive year in 2024 as corporate investment increased, even as oil product demand fell. Gross domestic product (GDP) rose at an annualised rate of 2.8pc in October-December, according to preliminary government data released on 17 February, following growth of 1.7pc in July-September and 3pc in April-June. This sent Japan's full-year 2024 GDP up by 0.1pc from a year earlier, its fourth straight year of growth after a Covid-19 induced slump in 2020. Nominal GDP amount totalled ¥609.3 trillion ($4 trillion) in 2024, exceeding ¥600 trillion for the first time. Investment by private-sector companies rose by 1.2pc from a year earlier in 2024, recording annualised growth of 1.9pc in October-December. The rise partially reflected a government push for a green and digital transformation of the economy in line with its 2050 net-zero emission goal. Such spending is expected to continue to increase under Tokyo's economic stimulus package. Japanese business federation Keidanren has forecast that nominal capital investment could rise to ¥115 trillion in the April 2027 to March 2028 fiscal year, up by 7.5pc from an estimated ¥107 trillion in 2024-25. But private consumption, which accounts for more than 50pc of GDP, dropped by 0.1pc from a year earlier in 2024, as inflation capped spending by consumers. This also probably weighed on demand for oil products such as gasoline, despite government subsidies. Japan's domestic oil product sales averaged 2.4mn b/d in 2024, down by 5.2pc from a year earlier, according to data from the trade and industry ministry Meti. Gasoline sales, which accounted for 31pc of the total, dropped by 2.2pc to 752,700 b/d over the same period. But Japanese electricity demand edged up by 0.7pc year on year to an average of 98.8GW in 2024, according to nationwide transmission system operator the Organisation for Cross-regional Co-ordination of Transmission Operators. Stronger power demand reflected colder than normal weather in March and unusually hot weather in October. Japan's real GDP is predicted to rise by 1.2pc during the 2025-26 fiscal year, following predicted 0.4pc growth in 2024-25 and a 0.7pc rise in 2023-24, the Cabinet Office said on 24 January. The figures are the Cabinet Office's official estimates and form the basis of its economic and fiscal management policies. By Motoko Hasegawa Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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German election impacts on energy and mobility sectors


17/02/25
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17/02/25

German election impacts on energy and mobility sectors

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China's CNOOC starts output at Brazil Buzios7 oil field


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17/02/25

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Indonesia's gasoline imports hit record high in Dec


17/02/25
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17/02/25

Indonesia's gasoline imports hit record high in Dec

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