US Crude Balances and Exports Update
March 22, 2024
McQuilling has updated our latest forecasts for US Gulf crude balances and exports. According to our model, US Gulf exports are likely to trend negatively in April and May, a net reduction of 430,000 b/d compared to the Q1 average. We highlight the rationale below:
1) Near the end of Q1, major refineries in Europe and Far East will enter the seasonal maintenance period which will pull crude demand and imports lower. These two regions happen to be the main importers of US Gulf crude, therefore, putting downside pressure on crude exports from the US Gulf region.
2) According to Reuters, BP's 435,000 b/d Whiting Refinery in Louisiana has resumed their production this week after being shutdown for a month and a half due to power outages. The return of this refinery is expected to further support domestic crude demand, tightening US balances, and leaving less crude for the export market.
3) The latest EIA data revealed continued decline in gasoline and distillate inventory - gasoline stock dropped over 200,000 barrels and distillate stocks dropped by 10,000 barrels since February. This should drive the CPP prices up and incentivize CPP imports but also widen refinery margin to run more local crude, especially now since major US refineries have recently finished their maintenance. The strong refinery margin in the US could also be partly driven by drone attacks at various Russian refineries. According to FGE, we now expect around 600,000 b/d of capacity being affected, which in return could find an increase of 250-300 b/d of Urals exported. This additional supply of Urals in the market could put downside pressure on WTI pricing and potentially US crude exports to the East of Suez market.
4) On the crude import side, the Mexico's new Dos Bocas refinery has ramped up since late last year, which is expected to add 340,000 b/d at full capacity. The increased domestic demand has left less crude in the export market; we only counted a total of 44 spot Aframax ECM>USG cargoes in Jan-Feb 2024, compared to 64 during the same period last year. Meanwhile, the upcoming expanded Trans Mountain Pipeline in Canada will reduce available Canadian crude in the US Gulf region through the Keystone Pipeline. Alongside the continuation of OPEC+ production cuts, the pressured US crude imports resulting from the two projects will force local refineries to run more domestic crude, which is expected to further tighten available exports going forward.
Figure 1 – US Crude Balances Figure 2 – US Crude Exports
Source: McQuilling Services
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