|SIn fall of 2004, while gasoline stocks were
rising to unusual levels, distillate stocks were experiencing an unusual
decline. At the end of August,
distillate stocks were on the high side before large drops in September and
October brought levels to the bottom of the band.
|SThe drops can be traced partly to Hurricane
Ivan, which occurred in late September and resulted in reduced refinery
|–Refinery data for September and October
clearly indicate that refinery input levels were unusually low in those
|–Distillate yields were at reasonable levels,
but low crude oil inputs kept distillate production depressed, requiring
stocks to help meet demand.
|SBut did Ivan keep refinery runs low until
mid-November when input picked up enough to build stocks? Why did gasoline not experience the same
drawdown in September and October, and why did gasoline stocks remain so much
higher than distillate stocks? The
answer goes back to the international situation and the time of year. Strong
gasoline imports were depressing the need for high U.S. refinery run levels.
|SThe situation with Katrina and Rita is very
different this year than we saw with Ivan.
The loss of refinery production is much larger than with Ivan. All the crude oil that can be input to
refineries will be run. Until more
refineries are back in production, refinery yields will favor gasoline over
distillate since even high gasoline imports will not turn the situation in
|SThis means that distillate will not be moved
forward again until November and December to recover the ground lost in
September and October. In short, the
distillate picture going into winter looks challenging.