US expects crude releases will offset Opec+ cuts

Market: Crude oil, Oil products
26/09/22

Two upcoming sales of crude from the US Strategic Petroleum Reserve (SPR) likely will "more than offset" a recent decision by Opec+ to lower production targets next month, a top White House official said.

The US already has sold 155mn bl of crude from the SPR, out of 180mn bl that President Joe Biden ordered withdrawn from the reserve as a "wartime bridge" to ease energy disruptions caused by Russia's invasion of Ukraine. Although those sales are mostly finished, two remaining sales will put downward pressure on prices, White House chief of staff Ron Klain said in an interview on the Fast Politics podcast released today.

"Most of that is finished, but there's still two significant sales left," Klain said. "That helps bring down the price by putting more oil on the market."

The US last week offered to sell another 10mn bl of sweet crude from the SPR for delivery in November. That will leave 15mn bl available to sell under the 180mn bl authorization.

The Opec+ coalition earlier this month agreed to cut its October crude production target by 100,000 b/d. The upcoming SPR sale would reduce the price effects of a "very small production cut," Klain said.

"We think that the next sale we do from the Strategic Petroleum Reserve more than offsets that," Klain said. "I think barring some kind of event that disrupts the supply - like a hurricane in the Gulf, or something like that - we think we're on track for continued declines on the price of gas."

US gasoline prices have declined over the last 15 weeks, dropping to an average of $3.65/USG for regular grade in the week ended on 19 September from a record high of $5/USG in mid-June, according to data from the US Energy Information Administration.

Democrats are considering changes to how the US manages its strategic reserves, featuring 422.6mn bl of crude in the SPR and 2mn bl of diesel and gasoline in a US northeast products reserve.

US House Energy and Commerce Committee chairman Frank Pallone (D-New Jersey) has crafted a bill that would create strategic reserves of diesel and gasoline in each region of the US that could be deployed immediately during emergencies. It would also create a new 350mn bl subset of the SPR with the goal of moderating prices, by giving the US the ability to buy oil when prices are less than $60/bl and sell when prices exceed $90/bl.

By Chris Knight

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27/12/24

Viewpoint: Trump tariffs may inflate midcon fuel costs

Houston, 27 December (Argus) — President-elect Donald Trump's threat to impose tariffs on all Canadian imports would increase costs for producing US midcontinent road fuels, which are largely refined from Western Canadian Select (WCS) crude. Trump said in November that he plans to impose a 25pc tariff on all imports from Mexico and Canada after he takes office on 20 January. Canadian crude is the top feedstock for Midwest refiners, accounting for 66pc of the region's crude runs in September, according to US Energy Information Administration (EIA) data. Parts of the Midwest — as well as California and the northeast US — lack sufficient pipeline capacity to process domestic crude or to receive refined products from elsewhere in the country, according to the American Fuel and Petrochemical Manufacturers (AFPM), which represents many US refiners. So AFPM wants Trump to exclude crude and refined products from his proposed tariffs. Most refiners in the US midcontinent depend on heavy sour crudes, with over 20 marketers and refiners importing crude from Canada in September, including BP's 435,000 b/d Whiting, Indiana, refinery; Cenovus' 151,000 b/d Toledo refinery in Ohio; Marathon Petroleum's 140,000 b/d Detroit, Michigan, refinery; and Phillips 66's 356,000 b/d Wood River refinery in Roxana, Illinois. Generally, heavier sour crudes are less expensive than lighter, sweeter crudes like WTI. The US in September imported 4mn b/d of crude from Canada, accounting for 62pc of total US crude imports and a record high for the month, according to EIA data. The US midcontinent imported 2.6mn b/d of Canadian crude in the month, also a record high for September. In 2023, the region imported 2.7mn b/d of Canadian crude, the highest annual imports recorded for the region, according to the EIA. Canada could move more of its crude through its 590,000 b/d Trans Mountain Expansion (TMX) pipeline to the Pacific coast, where it would head to international markets. US importers could also take more from countries like Saudi Arabia and Venezuela , which produce the heavy, sour crudes favored by refiners in the upper US midcontinent. Each supplied more than 200,000 b/d to the US in September, the largest exporters after Canada and Mexico, according to the EIA. Pipeline movements from the US Gulf coast to the US midcontinent would likely increase if the upper US midcontinent refiners try to replace Canadian heavy sour crude. The region received 23.5mn b/d of crude from the Gulf coast, as the southern US midcontinent processes WTI. But the region would probably face higher landed costs for crude originating from overseas. Refineries would have to be more disciplined with the increased feedstock costs that the threatened tariffs would impose, according to one market participant. The region would still have to rely on Canadian crude because US Gulf coast crude barrels would still cost more, and midcontinent refiners would have difficulty finding alternative sources. WCS Hardisty crude prices have averaged a discount of $17.08/bl to WTI Houston so far in the fourth quarter. For road fuel prices during the fourth quarter to date, Chicago gasoline prices averaged a 1.33¢/USG discount to the US Gulf coast and Chicago ultra low sulphur diesel averaged a 1.34¢/USG discount. But regional spreads between Chicago and the US Gulf coast could continue to narrow if midcontinent refiners reduce operating rates. By Hunter Fite Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Shell shuts oil unit at Singapore refinery

27/12/24

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27/12/24

Shell shuts oil unit at Singapore refinery

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Viewpoint: US naphtha market poised for change

26/12/24

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26/12/24

Viewpoint: US naphtha market poised for change

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Viewpoint: Tariffs may curb US bunker demand

26/12/24

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26/12/24

Viewpoint: Tariffs may curb US bunker demand

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Viewpoint: US jet fuel demand to trail passenger growth

26/12/24

News

26/12/24

Viewpoint: US jet fuel demand to trail passenger growth

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