Diesel prices on the east coast are rising relative to the rest of the country, with the region producing nearly half of its usual output this year.

Retail prices recorded in SONAR’s DTS dataset speak to the increase in diesel prices .On Sept. 16, retail diesel in Allentown, Pennsylvania, a major logistics center, was $5.116 a gallon, while Houston’s price is $4.513 a gallon, a difference of more than 60 cents. On Oct. 15, Allentown is $5.663 a gallon while Houston is $4.70, a spread of 96.3 cents. On Thursday, Allentown was at $6.028 a gallon and Houston was at $4.70 a gallon, a gap of $1.328 a gallon.

The East Coast price blowout has been propelled largely by the tight inventory situation in what is known as PADD 1, the Department of Energy’s designation for that region.

Weekly statistics reported by the EIA this week had low sulfur diesel inventories at PADD 1 at 21.3 million barrels for the week ended October 21, a decrease of more than 7% in one week. But what stands out the most is the fact that these stocks are 56.5% of the five-year average for the corresponding October week, excluding the related pandemic 2020 data.

In contrast, the national product for all distillates, which is not broken down by different grades, is around 80-81% of the five-year average, which analysts consider highly.

Tight supplies on the East Coast were also driven home this week by a Supply Alert published by Mansfield Oil Co., a leading supplier of wholesale fuels to the East Coast and other parts of the country.

Mansfield, in a supply statement released on Tuesday, said it is continuing to level 4 for diesel subsidies. It was not immediately clear what was happening at Category 4, although it was less than the Category 5 rating it had set for Hurricane Ian.An email sent to Mansfield had not been responded to at publication time.

The supply chain also said it was moving the southeast region into code red. Under Code Red, the company is asking for “72 hours notice for deliveries where possible to ensure that fuel and cargo can be saved in economic conditions.” The step below, which was implemented for part of the country during Ian, is the orange code, asking for a 48-hour window.

Data on the East Coast’s supply shortfall can be found in other exhibits. For example, data provided to FreightWaves by third parties shows that the spread between Brent crude and ultra-low sulfur diesel is transported by pipeline in Linden, New Jersey, published by S&P Global Commodity Insights, which support his Platts work, has been recently. up to $85. and $87 per barrel. But that went down just a week ago, when it topped $100 for three straight days. A month ago it was about $50 a barrel.

Other price data, befitting a market in such turmoil, is all over the place. For example, Pilot Flying J publishes a downloadable spreadsheet of the retail prices throughout the entire 830-plus outlet system. And while prices there do show the East Coast significantly higher than the Gulf Coast, the spreads are hardly consistent.

Weekly data from the Energy Information Administration shows little difference between the East Coast and the nation as a whole, with just $5.341 a gallon nationally and $5.379 a gallon on the East Coast on Monday. East Coast numbers are included in the national numbers.

But the spread with the Gulf Coast most recently was 39.2 cents a gallon, with the Gulf still below $5 at $4.987 a gallon. That almost 40-cent spread isn’t even the highest this year; it was well over 60 cents during a similar East Coast squeeze in May.

With those kinds of margins, East Coast refiners — a dwindling breed — are rushing to take advantage of it — those that are left.

PADD 1 refiners ran at 102.5% of capacity in the week ended Oct. 21, the EIA said, a statistical quirk as refiners find ways to exceed their nameplate capacity. However, it is generally viewed as not sustainable for lengthy periods of time.

But this rate of more than 100% is only relatively recent; The normal fall maintenance level moved the utilization rate between 85% and 90% for five weeks starting in mid-September.

That also contrasts with the EIA’s expected base capacity of 818,000 barrels per day, up from 1.22 million barrels per day through the mid-2020s. But the region has been hit by several refinery closures in recent years, most notably the large Philadelphia Energy Solutions refinery, which shut down for months after a fire in 2019. It processes 335,000 barrels per day of refining. market power on the east coast. The closure of the Come-by-Chance refinery in the Canadian province of Newfoundland in 2020 did not contribute to the EIA figures for the East Coast. It is being replaced by a new diesel plant that will produce 18,000 barrels per day of this product, which can be consumed in diesel without further processing. But if the 133,000-per-day refinery produces one-third diesel, which is a rough estimate for most refineries, that still represents a loss of nearly 30,000 barrels. per day of East Coast diesel. .

The facility to replace Come-by-Chance is called Braya Renewable Fuels, and it isn’t in commercial operation yet. 

The irony in the tight market is that there are some signs of declining demand. The EIA’s most recent figure for Product Supplied, its proxy for demand, showed all distillate consumption in the week ending Oct. 21 at 3.87 million barrels a day. That is the first week less than 4 million barrels a day in four weeks, though demand had been less than that 4 million figure for 24 out of 25 weeks prior to that. 

But EIA data generally has the third week of October in excess of 4 million barrels a day, as it comes in the middle of harvest season and consumers who use heating oil filling their tanks in anticipation of winter. Heating oil, like diesel, is a distillate and weekly data does not break down different types of fuel in the Product Supplied number. 

Leave a Reply

Your email address will not be published. Required fields are marked *