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This Week in Petroleum

Release date: April 1, 2020  |  Next release date: April 8, 2020

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U.S. gross refinery inputs declined in 2019, and weekly gross inputs have fallen significantly so far in 2020

U.S. gross refinery inputs averaged 17.0 million barrels per day (b/d) in 2019, down from the record high of 17.3 million b/d set in 2018, but still the second-most on record (based on data going back to 1985). The drop in 2019 is the first time since 2009 that annual gross refinery inputs decreased from the previous year. The lower annual refinery runs in 2019 were the result of a sharp decrease in refinery runs during the February–March maintenance season and because of the Philadelphia Energy Solutions (PES) fire and refinery outage in June (Figure 1). More recently, weekly refinery gross inputs fell significantly the week ending March 27, 2020, as a result of the effects on petroleum product demand from the 2019 novel coronavirus disease (COVID-19). Gasoline crack spreads (the difference between wholesale prices and crude oil) have fallen sharply recently, reflecting weak demand. As the COVID-19 outbreak continues, gross refinery inputs and petroleum product demand remain highly uncertain.

Figure 1. U.S. gross refinery inputs (rolling four-week average)

Declining refinery runs in the first half of 2019 were driven by low refinery runs in the Midwest (Petroleum Administration for Defense District, or PADD, 2), where refinery runs fell by 132,000 b/d compared with the same period in 2018. This decrease may reflect an unusually extensive refinery maintenance season before the implementation of the International Maritime Organizations new regulations (IMO2020). In the second half of 2019, lower U.S. refinery runs were driven by declines in the Gulf Coast (PADD 3) and East Coast (PADD 1). Compared with the second half of 2018, Gulf Coast refinery runs were down by 242,000 b/d, and East Coast refinery runs were down by 212,000 b/d.

East Coast refinery runs declined because of the PES refinery fire and subsequent shutdown in June. The PES refinery shutdown drove reductions in PADD 1 gross refinery inputs from 980,000 b/d in the first half of 2019 to 821,000 b/d in the second half of the year. The PES refinery outage decreased the available supply of refined products in the East Coast. To meet demand, imports and shipments to the East Coast from other U.S. regions both increased. For example, pipeline flows of gasoline from the Gulf Coast to the East Coast averaged 1.6 million b/d in the second half of 2019, an increase of 75,000 b/d from the first half of the year and 53,000 b/d more than the five-year (2014–18) average for that period. Despite the increased shipments to the East Coast, decreasing gasoline demand likely contributed to 2019 Gulf Coast refinery runs falling by 135,000 b/d from 2018 levels.

Gasoline demand is typically higher in the second half of year, which includes most of the summer driving season. On a five-year average (2014–18) basis, consumption, which the U.S. Energy Information Administration (EIA) measures using product supplied as a proxy, increased by 192,000 b/d in the second half of the year, but it only increased by 108,000 b/d during that same period in 2019, 44% lower than the typical increase.

So far in 2020, high levels of global crude oil supply (driven partially by the suspension of the agreed production cuts among the Organization of the Petroleum Exporting Countries (OPEC) and partner countries) combined with precipitously falling demand because of the COVID-19 outbreak have driven both gasoline and crude oil prices down. Gasoline prices, however, have fallen faster than crude oil, and Gulf Coast gasoline crack spreads (calculated with front month prices) fell into negative territory for the first time since December 2014 (Figure 2).

Figure 2. U.S. Gulf Coast gasoline crack spread

U.S. gasoline product supplied in 2020 (through March 27) has averaged 8.7 million b/d, down by 271,000 b/d from the same period in 2019. In the week ending March 27, gasoline product supplied fell by 2.2 million b/d, the largest weekly decline since at least 1991, when EIA record-keeping began (Figure 3). As people continue to limit travel because of COVID-19, EIA expects demand for gasoline to remain low. However, details on the exact effects on petroleum product demand remain highly uncertain because the duration and extent of the outbreak is unknown.

Figure 3. U.S. gasoline product supplied

The recent decision by the federal government to delay the introduction of summer-grade gasoline was supportive of refinery runs because it alleviated the need to immediately reduce refinery runs to work off winter gasoline inventories, and refinery runs remained higher than the previous five-year (2015-19) average as of March 20. However, declining demand and crack spreads led refiners to curtail runs. For the week ending March 27, 2020, U.S. refinery gross inputs fell by 936,000 b/d, the largest single week decline since September 2017, after Hurricane Harvey hit the U.S. Gulf Coast. Product supplied decreased faster than refinery runs, and total weekly gasoline inventories increased by 7.5 million barrels the week ending March 27, exceeding the previous five-year maximum for this week.

Weekly data on gasoline inventories indicate that average U.S. inventory levels are well above the previous five-year range for this time of year and are 4.2 million barrels higher than the five-year maximum (Figure 4). Although U.S. inventories have some additional capacity, trade press reports indicate that product storage in specific areas of the country may already be near their upper limits. If large weekly builds continue and gasoline demand remains low, refiners will need to cut runs further.

Figure 4. U.S. total motor gasoline inventories

U.S. average regular gasoline and diesel prices fall

On March 30, the average regular gasoline retail price for the United States fell nearly 12 cents from the previous week to $2.01 per gallon, 69 cents lower than a year ago. The Midwest price fell nearly 14 cents to $1.74 per gallon, the Rocky Mountain price fell more than 13 cents to $2.11 per gallon, the West Coast price fell nearly 12 cents to $2.76 per gallon, the East Coast price fell more than 10 cents to $1.98 per gallon, and the Gulf Coast price fell nearly 10 cents to $1.76 per gallon.

The U.S. average diesel fuel price fell more than 7 cents from the previous week to $2.59 per gallon on March 30, 49 cents lower than a year ago. The West Coast price fell more than 12 cents to $3.13 per gallon, the Rocky Mountain price fell nearly 9 cents to $2.59 per gallon, the Gulf Coast price fell nearly 8 cents to $2.36 per gallon, the Midwest price fell nearly 7 cents to $2.43 per gallon, and the East Coast price fell more than 5 cents to $2.67 per gallon.

Propane/propylene inventories decline

U.S. propane/propylene stocks decreased by 0.3 million barrels last week to 64.7 million barrels as of March 27, 2020, 14.4 million barrels (28.7%) above the five-year (2015-19) average inventory levels for this same time of year. Gulf Coast inventories decreased by 0.5 million barrels and East Coast inventories fell slightly, remaining virtually unchanged. Midwest and Rocky Mountain/West Coast inventories increased by 0.2 million barrels and 0.1 million barrels, respectively. Propylene non-fuel-use inventories represented 8.6% of total propane/propylene inventories.

Residential heating fuel prices decrease

As of March 30, 2020, residential heating oil prices averaged more than $2.42 per gallon, almost 3 cents per gallon below last week’s price. Wholesale heating oil prices averaged more than $1.17 per gallon, 6 cents per gallon above last week’s price. There are no comparative weekly heating oil data available for the year-ago period.

Residential propane prices averaged nearly $1.87 per gallon, more than 3 cents per gallon below last week’s price. Wholesale propane prices averaged more than $0.43 per gallon, more than 1 cent per gallon higher than last week’s price.

There are no comparative weekly propane data available for the year-ago period. This data collection is the last one for the 2019-2020 State Heating Oil and Propane Program (SHOPP) heating season. Data collection will resume on October 5, 2020, for publication on Wednesday, October 7, 2020.

For questions about This Week in Petroleum, contact the Petroleum Markets Team at 202-586-4522.

Tags: consumption/demand , gasoline , oil/petroleum , prices , refineries

Retail prices (dollars per gallon)

Retail price graphs
  Retail prices Change from last
  03/30/20 Week Year
Gasoline 2.005 -0.115 -0.686
Diesel 2.586 -0.073 -0.492
Heating Oil 2.421 -0.026 NA
Propane 1.869 -0.033 NA

Futures prices (dollars per gallon*)

Futures price graphs
  Futures prices Change from last
  03/27/20 Week Year
Crude oil 21.51 -0.92 -38.63
Gasoline 0.574 -0.031 -1.322
Heating oil 1.069 0.063 -0.904
*Note: Crude oil price in dollars per barrel.

Stocks (million barrels)

Stock price graphs
  Stocks Change from last
  03/27/20 Week Year
Crude oil 469.2 13.8 19.7
Gasoline 246.8 7.5 10.0
Distillate 122.2 -2.2 -5.9
Propane 64.668 -0.251 11.473