Shell shuts oil unit at Singapore refinery

Spanish Market: Oil products
27/12/24

Shell has shut an oil unit at the 237,000 b/d Pulau Bukom refinery in Singapore to investigate a "suspected leak", said the Maritime and Port Authority of Singapore (MPA) and National Environment Agency (NEA) today.

Shell informed the government agencies that they will have to shut one of its "oil processing units" at Pulau Bukom to facilitate investigations into a suspected leak.

The exact oil processing unit cannot be confirmed, but it is a unit "used to produce refined oil products such as diesel". This means it is likely a crude distillation unit or a hydrocracking unit. Shell's initial estimates show that a few tonnes of oil products were leaked, together with cooling water discharge. Sea water is typically drawn to aid in the cooling process, according to the media release.

This came after the 20 October leak at a pipeline at Pulau Bukom, when 30-40t of "slop" — or a mixture of oil and water — leaked into the sea, according to Shell.

The gasoline market has shown little reaction so far with spreads being "stagnant" and "range bound", said a Singapore-based gasoline broker. But this could be because of a lack of market activity, with many traders away for holidays at the end of the year. The gasoil January-February spread last traded at $0.58/bl in backwardation at around 6:30pm Singapore time on 27 December, according to a Singapore-based gasoil broker. This marks a slight increase from an assessment of $0.55/bl in backwardation on 26 December, according to Argus pricing data.

By Aldric Chew

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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.

Viewpoint: US naphtha market poised for change

26/12/24

Viewpoint: US naphtha market poised for change

Houston, 26 December (Argus) — US Gulf coast naphtha supplies accumulated in the last half of 2024 amid faltering demand, with gasoline blenders representing a higher profile buying sector, but a pending refinery closure is set to tighten the market. Demand for all naphtha grades was much weaker coming into December because of a bearish gasoline outlook and as elevated octane prices dampened naphtha demand. Poor refinery margins encouraged refiners to run minimally, cutting back on refiner demand as well. Gasoline blenders' demand for naphtha dominated in 2024, which highlighted stronger naphtha prices in visible trades. Prices for good quality, low sulphur N+A naphtha into the gasoline blend pool averaged about 10-15¢/USG above generic reformer feedstock naphtha. Naphtha sellers were also keen to export, which moved larger volumes without engaging in volatile domestic spot markets. US naphtha exports this year through mid-December were up by over 50pc to average 272,730 b/d from a year prior, according to Vortexa data. From November to mid-December, naphtha departures from the US were up on the year by 66pc to 312,800 b/d. Despite overall increased exports in 2024, weakened Asia Pacific and European naphtha markets in the latter half of December diminished arbitrage opportunities. Heavy virgin naphtha (HVN) differentials to Nymex RBOB hovered in the mid-to-stronger 30s¢/USG discounts in the first half of December, compared with upper Nymex RBOB -40s¢/USG observed in the same period last year. However, these higher differentials were attributed more to the lower Nymex RBOB pricing basis than market strength. Comparative cash prices hovered around 160¢/USG year on year, despite a 10¢/bl hike in differentials in 2024. Supply, demand changes in store A major supply change in the Gulf coast naphtha market should tighten the ample supply of naphtha by February. LyondellBasell is on schedule to begin a staggered shutdown of its 264,000 b/d refinery in Houston, Texas, in January. The last crude distillation unit (CDU) at the site is expected to shut by February. The refiner is a steady supplier of premium quality HVN with very low sulphur, which is typically sold into the gasoline blending market. Depending on production rates, LyondellBasell, also known as Houston Refining (HRC) in naphtha circles, can load 10-15 barges of the premium quality HVN a month. However, Gulf coast naphtha remains well-supplied. ExxonMobil's third CDU at its 609,000 b/d Beaumont, Texas, refinery started operations in 2023, adding more naphtha production to the region. Naphtha exports were also significant on the demand front in 2024, despite Gulf coast naphtha export opportunities to Venezuela being curbed again on 18 April. US sanctions on oil trades to Venezuela were eased in October 2023, but reimposed by April this year due to fresh political conflict. Naphtha exports to Venezuela are currently restricted to joint-venture partners such as Chevron and Reliance. Some participants hope the incoming administration of president-elect Donald Trump will re-address oil trading with Venezuela, keeping this an item to watch in 2025. US naphtha exports to Venezuela averaged 57,600 b/d in 2024, up from 11,100 b/d during 2023, according to Vortexa, on relaxation of Venezuela sanctions from October 2023 through May 2024. Meanwhile, naphtha exports out of the Gulf coast were still focused on shipments to South America, led by Brazil and Colombia. Exports to Brazil averaged 48,600 b/d in 2024, up by 68pc from 2023 while naphtha arrivals in Colombia averaged 36,600 b/d in 2024, up by 36pc from 2023. Colombia buys light naphtha from the US for use as diluent and sells full-range naphtha out of Mamonal port to the US. By Daphne Tan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Tariffs may curb US bunker demand

26/12/24

Viewpoint: Tariffs may curb US bunker demand

New York, 26 December (Argus) — US president-elect Donald Trump's plans to enact new tariffs, especially those targeting Mexico and Canada, may curb demand for US bunker fuel and ripple across international markets. The proposed 25pc tariffs on imports from Mexico and Canada could affect all products coming into the US from those countries, including the significant volumes of residual fuel oil from Mexico and Canada that US Gulf coast and east coast buyers import. This could lift prices of residual fuel oil sold for bunkering in US Gulf coast and east coast ports, prompting some ship owners calling there to instead fuel outside the US in more price-competitive ports. Depending on their routes, ship owners could shift some of their bunker demand to Singapore, Rotterdam, Fujairah and Panama. Mexico alone supplied 74pc of the residual fuel oil imported to the US Gulf coast and and 29pc to the east coast in the first nine months of the year, according to US Energy Information Administration (EIA) data ( see table ). Meanwhile, Canada supplied 7pc and 16pc of the fuel oil imported to the US Gulf and east coasts, respectively. The US east coast imported 46,730 b/d of residual fuel oil and produced 35,000 b/d in the first nine months of the year ( see chart ). By comparison, the US Gulf coast imported 48,909 b/d and produced 161,667 b/d. Prices of Canadian and Mexican residual fuel oil exports to the US are typically benchmarked against US Gulf and east coast residual fuel oil prices. Should Trump implement the 25pc tariffs, companies bringing Canadian and Mexican residual fuel oil to the US could bid lower to try to offset their tariff costs. Lower bids from US buyers could redirect some of the Mexican and Canadian residual fuel oil exports to buyers in northwest Europe, Panama and Singapore. Or if Canadian and Mexican producers are not able to find lucrative clients outside of North America, they may have to settle for lower profit margins for their residual fuel oil exports to the US. On the US west coast, Trump's campaign promise to impose tariffs of up to 60pc on imports from China has already prompted some shippers to front-load container cargoes. Potential additional tariffs could slow container ship traffic from China to the US' busiest container ship ports — Los Angeles and Long Beach in California. There is a lot of uncertainty around the extent of Trump's tariff plans, as some analysts view his threats as aimed at generating leverage for negotiations. But provided that they are put into place, the Mexico and Canada tariffs could push US east and Gulf coast importers to purchase more residual fuel oil from other countries like Algeria, Colombia, Iraq, Kuwait, Nigeria, Peru and Saudi Arabia. An increase in Chinese tariffs could prompt US west coast importers to shift their purchases to other southeast Asian countries such as Vietnam, Indonesia, Malaysia and Thailand. But once the dust settles from the geographical reshuffling, new trading networks may have been established, and the US bunker market could settle into a new normal. By Stefka Wechsler US Gulf and east coasts residual fuel oil imports, Jan-Sep 2024 '000 b/d East coast % of all countries Gulf coast % of all countries Mexico 13.6 29% 36.1 74% Canada 7.4 16% 3.3 7% All countries 46.7 100% 48.9 100% — EIA US Gulf and east coast FO imports, Jan-Sep ’000 b/d Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US jet fuel demand to trail passenger growth

26/12/24

Viewpoint: US jet fuel demand to trail passenger growth

Houston, 26 December (Argus) — The upward trajectory of US jet fuel demand is likely to continue lagging the pace of rising passenger numbers because of recent capacity gains for multiple US airlines and the slow but steady improvement of aircraft fuel efficiency. More than 2.35mn travelers were screened weekly at US airports this year through the end of November, according to the US Transportation Security Administration (TSA) — a 6.2pc increase from the same 11-month period in 2019, before the Covid-19 pandemic curtailed domestic and international flights. Passenger screenings have exceeded 2019 levels consistently since the summer of 2023. Yet US jet fuel products supplied — a proxy for demand — remains stubbornly below pre-Covid-19 levels, despite the rise in traffic. Weekly jet fuel products supplied this year through 13 December was 1.66mn b/d, down by 6.5pc from daily demand in full-year 2019, according to US Energy Information Administration (EIA) data. This slower recovery in jet demand relative to rising passenger numbers may be driven by several factors, including airlines carrying more passengers than in the past, as well as steady improvements in aircraft fuel efficiency. More seats, more flyers Many US airlines have increased flying capacity, as measured by available seat miles (ASMs), since pre-pandemic levels, while load factor — the percentage of seats filled by passengers — has been stable to lower compared with 2019. United Airlines' 2024 third quarter ASMs were up by 14pc at 81.54bn compared with the same three months in 2019. United's load factor was down by 0.8 percentage points to 85.3pc in the same period. Rival US carriers American Airlines and Southwest Airlines similarly posted capacity increases of 14pc and 15pc, respectively, compared with the third quarter of 2019. American's load factor was unchanged at 86.6pc, while Southwest saw a decline of 2.3pc to 81.2pc. Airlines have also made fuel efficiency improvements in recent years. This is in part from the retirement of many older airplane models during the lean years of the pandemic, combined with delivery of newer, more efficient models in more recent years. Southwest Airlines' third quarter fuel efficiency improved by 1.5pc year-over-year, the company said in October. Southwest improved its fuel efficiency with the delivery of nine Boeing MAX 8 aircraft in the third quarter while retiring 15 older planes. The MAX 8's and MAX 9s have average fuel efficiencies of 96 and 101 seat miles per USG (sm/USG), respectively. That would make them 23pc and 30pc more efficient than older planes they may have replaced, such as the Boeing 737-800, with a 78 sm/USG. Other airlines are also refreshing their fleets with newer, more fuel-efficient planes. American Airline's mainline fleet at the end of the third quarter grew by 2.2pc from a year earlier to 971 aircraft. It took in 600 new aircraft from 2013 to 2023, including 31 new planes in 2023. United Airline's third-quarter fleet was similarly 3.4pc larger than a year earlier. But there are limits to this growing efficiency. Globally the average age of airline fleets has risen to 14.8 years, according data from the International Air Transport Association (Iata) — up from 13.6 years in 1990-2024. This is due largely to the steep dropoff in new plane deliveries as aircraft manufacturers struggled with supply chain issues and high costs from the pandemic. Boeing, a chief provider of planes for many US airlines, had a spate of production disruptions in 2024, including a multi-week strike this past fall, that slowed the delivery of newer aircraft. But even a trickle of newer models would gradually affect fuel efficiency, potentially continuing to hold gains in fuel consumption below the rate of passenger growth. By Jared Ainsworth Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US Gulf high-octane component prices to rise

24/12/24

Viewpoint: US Gulf high-octane component prices to rise

Houston, 24 December (Argus) — Cash prices of high-octane gasoline blending components in the US Gulf coast are likely to rise in 2025 after a year of declines as lower refining capacity starts to thin stocks. Alkylate and reformate cash prices and differentials have been lower over the course of 2024, in part from weaker refining margins. The lower margins are reflected in the region's crack spreads, which narrowed to $12.94/USG on 19 December from $18.67/USG a year earlier, as abundant supply in the region met weak demand . Inventories in the region have also been lower over the course of the year. Stocks in the region fell in November by 2pc from a year earlier to an average 29.75mn bl. US Gulf coast crack spreads have been declining steadily since 2022, according to the Energy Information Administration's (EIA) November Short-Term Energy Outlook, brought on by lower overall product demand, especially for gasolin e . But the EIA expects spreads to hold steady next year, even with a decrease in refining capacity, potentially supporting prices for high-octane components. The upcoming year will also bring a significant refinery closure to the region, which should reduce production and raise cash prices of components such as alkylate and reformate. LyondellBasell's closure of its 264,000 b/d Houston, Texas, refinery is scheduled to start in January. The refinery's fluid catalytic cracking unit (FCC), which converts vacuum gasoil primarily into gasoline blendstocks, is expected to be shut in February, followed by a complete end to crude refining by the end of the first quarter. US total refining capacity should fall to 17.9mn b/d by the end of 2025, according to the EIA, 400,000 b/d less than at the end of 2024, with the lower production leading to price increases. Although the LyondellBasell closing should eventually give crack spreads in the region a boost, some in the industry do not expect a return to pre-pandemic levels of refining margins in the immediate future. CVR Energy chief executive David Lamp said in November the company needed "to see additional refining capacity rationalization in both the US and globally" for crack spreads to gain ground. An increase in consumer demand for gasoline would also support a rise in cash prices and differentials for high-octane components. But the EIA in December forecast consumption nationwide would rise in 2025 by only 10,000 b/d, or 0.1pc, to 8.95mn b/d. By Jason Metko Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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