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Product Markets and Refinery Operations
OPEC Monthly Oil Market Report – June 2016
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The gasoline crack spread lost more than $2 versus the previous month’s level to
average $22/b in May.
Graph 6.3: US Gulf crack spread vs. WTI, 2015-2016
Middle distillate
demand stood at around 4.1 mb/d in May, some 20 tb/d higher than
in the previous month and around 270 tb/d higher than in the same month a year
earlier. The middle distillate market has exhibited weak fundamentals in the last years.
However, during May it showed some signs of recovery. Some support has come from
stronger domestic demand, which has picked up since the middle of April. Another
supporting factor has been increasing exports to Latin America, mainly Argentina. This
has allowed inventories to continue falling, despite the increase seen in refinery runs.
In the futures market, heating oil Nymex positions reached net-long territory, something
which has not been seen since mid-2014. The US Gulf Coast (USGC) gasoil crack
averaged around $6/b in May, gaining around $2 from the previous month. The uptick
has been somehow limited by the pressure exerted by persistently high gasoil
availability in the Atlantic Basin, as reflected in recent weeks, with almost no impact
seen on the middle distillate market due to the French strikes.
At the
bottom of the barrel
, the fuel oil market recovered some ground, supported by
strong bunker demand in the USGC during the last several weeks, amid increasing
requirements from Mexico. The USGC high-sulphur fuel oil crack gained almost $1 to
average around minus $16/b in May.
European market
Product markets in Europe showed a mixed performance during May as the middle of
the barrel exhibited a recovery on the back of stronger regional demand, while the
gasoline crack spread weakened despite some export opportunities. Higher product
inventories offset the potential impact of the French refinery outages, causing refinery
margins to fall slightly in Europe.
The
gasoline
market partially retained the recovery seen in April, on the back of higher
export opportunities, driven by persistently strong demand in the US. This has allowed
for hefty transatlantic outflows to satisfy the increasing gasoline imports from the US
East Coast (USEC). However the gasoline cracks lost some ground last month as the
market was under pressure from additional volumes coming out of storage, increasing
availability, in addition to the approaching end of the maintenance season in the region.
Another bearish factor has been lower exports to West Africa. The gasoline crack
-20
0
20
40
60
-20
0
20
40
60
May 15
Jun 15
Jul 15
Aug 15
Sep 15
Oct 15
Nov 15
Dec 15
Jan 16
Feb 16
Mar 16
Apr 16
May 16
Jun 16
US$/b
US$/b
Premium gasoline
Jet/Kerosene
Diesel
Fuel oil
Sources: Argus Media and OPEC Secretariat.