Related: did imported LNG and oil save New England this year?
RBN Energy: distillate fundamentals in New England.
Freezing weather along the Atlantic Coast has disrupted refinery operations threatening supplies of refined products – in particular distillates – in an already tightly balanced market. The resultant spike in heating oil prices has encouraged European traders to ship cargoes to New York – a reversal of flow patterns seen in recent years. Today we look at northeast distillate fundamentals and explain why European imports are headed across the pond.
The balance between supply and demand for distillates – mostly ultra-low sulfur diesel (ULSD) for road use and heating oil for residential and commercial heating - is traditionally tight in the northeast. We first described the challenges of distillate supply in this market in the context of growing refinery closures back in 2012. Since then, access to cheaper crude transported from North Dakota and (to a lesser degree) from Canada, has rejuvenated the region’s refining industry. Distillate supply is still problematic however and – as we shall see- supply interruptions like those caused by freezing cold weather – can prompt unusual trade patterns.
According to data from the Energy Information Administration (EIA) the 9 operating refineries in Petroleum Administration District for Defense (PADD) 1 – representing the northeast and Atlantic Seaboard from Maine to Florida - have 1.3 MMb/d of crude processing capacity and produce about 350 Mb/d of distillates. Distillate demand in the region averages more than 3 times that local refinery output at 1.2 MMb/d with the largest consumption being on-road diesel (60%) and heating oil (25%).
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