Driving Discussions: Dropping in on USAC Diesel

Jason: From Argus Media, this is Driving Discussions, a podcast series where we focus on the forces that affect North American road fuels. Greetings and salutations, one and all. Once again, Jason Metco with you, Associate Editor of U.S. Products here at Argus. And on this conversation, we sit down for the first time with our USAC DISTY Senior Reporter, Cooper Shookley. We'll dive into what he has seen in the market over the last 90 days or so, assess where things are presently in the middle of July and look upon things for the rest of the summer of 2024. Cooper, welcome to the presentation. Glad to have you aboard for the first time. Last three months of your market, the Atlantic Coast distillate sector been pretty tame for the most part, I understand. Can you just speak as to what we've seen the last 90 days or so?

Cooper: Jason, good to be here. I think we're seeing really remarkable stability in the market and trends following kind of the typical pattern they do seasonally the past five years with a build and stockpiles of distillates in the region. And DIFS are very comfortable with those. They were seeing really a slight pattern of steady small movements into virtual prices, but also seeing usually when the EIA comes out at Wednesday, they show a build. We're seeing the markets pull back a little bit ever so slightly, but really just gets range-bound. The picture really looks like a bit of a cut and paste of this time last year. And the market, I think, is responding accordingly. And they're very comfortable with that.

Jason: Before we shift our focus to the present time, real quick, Cooper, jump back just a little bit further. We had the Francis Scott Key Bridge that went down, that accident back in March. I know that didn't affect markets as maybe the outside observer would believe that it could have. Can you just speak as to how that was the case?

Cooper: Sure. So terminals in Baltimore and D.C., which are in that region, are supplied by either corneal pipeline or foundation pipeline to all come from the Gulf Coast of the United States up through there. It's not a waterborne market in terms of crude or refined products. So it affected things like, you know, freight, dry freight, etc. I don't want to speak too much out of pocket about the different types of commodities and goods that come in and out of the ports of Baltimore. But as far as supplies of gasoline, diesel, crude, that was not affected whatsoever.

Jason: Our senior USAC distillate reporter, Cooper Shookley, is our guest on this edition of Driving Discussions. Cooper, let's get back to the present time here. You told me off-mic before we started chatting here that the market was remarkably stable. Does that surprise you? Does that surprise your market participants?

Cooper: Yeah, surprise, I guess, the surprise being no surprise. It kind of, I think, in Covery's market, a challenge has been to be okay with there not being always a headline-grabbing story. Your market isn't always the most interesting or intriguing one, albeit it's a very big, important market and nothing lasts forever. So, you know, there'll be a time, could be tomorrow, could be in a year or two years when the States is kind of upended by a Russian-Ukraine-like conflict or infrastructure going down, etc., for whatever reason. But I think really it's been the challenge for myself covering it to be okay with there not always being some remarkably complicated story to tell. It's a market that's been well supplied, not overly so. And I think the players in it are kind of knowing their place and not making any kind of drastic moves. So it's kind of watching all that.

Jason: You mentioned a story to tell. What story can you glean from how things are at the present moment here, Cooper?

Cooper: Yeah, the story being, I think, you know, markets move violently into place and gently in place, not my phrase, but I heard that one time. I think we're definitely gently in place right now. And I think keeping an eye on the refinery turnaround will happen September through November as refineries switch to winter-grade diesel. And that point, you might see delays, which are usually expected with coming back online. And at that point, you might see some actual day to day more nitty gritty, you know, responding to a fundamental imbalance happening. But I think the story has been just people in the market being okay with a very normal, typical summer story this market at this time.

Jason: I know you don't have as many as other parts of the country, but refineries in your region, they have not experienced what the Gulf Coast has experienced, like Houston with the derecho back in May, Hurricane Beryl recently. You've had in the last couple of days, we're recording this middle of July, a similar derecho rolling through the Chicagoland area affecting Joliet and other places. In some ways, it's a blessing for the USAC, isn't it?

Cooper: Yeah, I think last week with Beryl and the Gulf Coast, I think, you know, for whatever reason, the one thing that wasn't affected really at all, it seemed like was refineries, by and large, Northeast being downstream of the Gulf Coast through Colonial Pipeline, like this pipeline, nary a blip caused by that. So really, it's just been the fundamental lack of anything really dramatic happening, which is a good thing if you're a consumer, certainly. If you're a reporter, maybe part of you kind of want something happened, juicy, but it's really not quite there. But always a new day.

Jason: Couple more minutes with Cooper Shookley, our USAC Distillate senior reporter here on Argus Media's Driving Discussions. Cooper, next three months or so, I know you mentioned a little bit of refinery work possible. What else are we going to see here as we wind down the summer, do you think?

Cooper: The summer, I think, really will play out the way it's been playing out with builds of distillates continuing to be steady, but not dramatically so. I think if there is a week or a month or so of builds being anything less or more than average, the market will adjust. And I expect to see differentials following suit and staying really range bound right now. New York Harb barge diesel is minus two cents from the Nimex USD flat price. I would see it going up or down much more than five plus or minus from that this summer. And then September to November, we'll sort of see the refinery turnarounds. And at that point, you know, could see the facility that's late or not late getting back online. So I think really the that I feel like the market is going to be a little very confident that barring anything happening dramatic, we'll see a very similar story play out through the end of summer.

Jason: Oh, he's pretty confident in his market. Cooper, appreciate the time, my friend. Thanks for doing this and we'll catch up with you in the fall. Okay?

Cooper: Jason, thanks a lot.

Jason: Thanks to Cooper Shookley, our U.S. Atlantic Coast Distillates senior reporter for making his debut on the Driving Discussions podcast series, a production of Argus Media, a leading independent provider of commodity pricing and information. And for more information when it comes to all things U.S. products here at Argus, we encourage you to visit argusmedia.com/us-products.