April 3, 2020:

Numbers just released by the federal agency in charge of collecting and analyzing energy data confirms how much the spread of the coronavirus has affected driving habits of Americans and, by extension, what it has done to the sheer volume and price of gasoline in the space of just a couple of weeks. In its weekly review of the nation’s petroleum sector, the U.S. Energy Information Administration reported for the week ending March 27: the amount of “gasoline product supplied” — or, consumption — fell by 2.2 million barrels a day, the largest weekly decline since the agency started keeping records in 1991, and

refineries, bulging with supplies, saw inputs fall by 936,000 barrels a day, the largest single week decline since September 2017 after Hurricane Harvey hit the Gulf Coast. In addition, the Energy Information Administration reported the average price for a gallon of regular gas, as of March 30, had dropped 42 cents nationally and 38 cents in California in the space of four weeks. “This is no man’s land,” said David Hackett, president of Stillwater Associates, a transportation energy consulting company in Irvine. “We’re in uncharted territory.” Normally, a sharp increase in the amount of gasoline in the market results in a drop in prices which results in an increase in driving and vice-versa. But with stay-at-home restrictions put in place by federal, state and local governments to try to curb the spread of coronavirus, people are not driving nearly as much as they used to. As a result, prices have fallen and consumption — instead of increasing — has cratered

“This is very different from all of the other shocks that we’ve seen before,” Hackett said. “All of those shocks before were on the supply side — like OPEC either raising or lowering the price (of oil) or there’s a hurricane or all of a sudden tracking works and suddenly there’s a lot more oil — that’s all supply-side stuff. We’re used to that. We’ve never seen demand come off by half while everything else is still running.” Saudi Arabia is currently engaged in a standoff with Russia that has seen both oil giants ramp up production, which has flooded the global market and contributed to the excess supply of crude and its refined product, gasoline. In another data point released by the Energy Information Administration, gasoline inventories increased by 7.5 million barrels in the past week.  With Hackett’s company estimating demand has fallen 50 percent, he expects some refineries on the West Coast to shut down because stocks are so high. “Even beyond the people that will get thrown out of work, shutting a refinery down and getting it restarted is an awful lot of work,” Hackett said. “It’s expensive but at this point, they (refiners) don’t have a choice. They’re going to have to shut them down and they won’t restart them until demand starts to come back because there’s no place to go with the gas.” According to AAA, the average price for a gallon of gas in San Diego is quickly heading below $3. As of Thursday, it was $3.05, down 48 cents from a month ago and some apps that drivers can download show a growing number of gas stations in the area with prices sub-$3 a gallon.

The Energy Information Administration reported gas prices have fallen faster than crude oil and that Gulf Coast gasoline “crack spreads” — the difference between wholesale gasoline prices and crude oil — fell into negative territory for the first time in five and a half years. Hackett said a colleague who has been in the fuel business for 40 years called him the other day. “He said, ‘Hey, Dave, now I can retire.’ I said why and he said, ‘Now I’ve finally seen everything.’”

By www.sandiegouniontribune.com

April 3, 2020:

HollyFrontier — one of the two remaining Utah refineries that has yet to produce low-sulfur “Tier 3” gasoline — announced Thursday that it is beginning upgrades that should allow its Wood Cross refinery to produce the cleaner fuel in about six months.  “By moving to Tier 3 fuels, we are advancing our commitment to deliver high-quality fuel products in an environmentally responsible way,” said Scott White, vice president and manager at the Woods Cross refinery.  He said a $3 million first-phase project should allow delivery of the fuel to begin in about six months, but that is contingent on the availability of construction crews and supplies that could be disrupted by the COVID-19 outbreak. Once the initial project is complete, not all fuel produced there will be Tier 3 yet. “But 100% of the fuel that we sell here in the greater Wasatch [Front] area will be Tier 3 quality,” White said.  The move will leave Big West as the only refinery in Utah yet to produce Tier 3 fuel. However, it said earlier this year it is pursuing opportunities to offer it and still is producing low-sulfur gas — but not yet at the 10 parts per million level of Tier 3.  Utah’s three other refineries — Marathon, Chevron and Silver Eagle — have been producing Tier 3 since about the beginning of the year. Also, Sinclair Oil has said it is piping Tier 3 gasoline to Utah from two Wyoming refineries. 

Federal rules require oil companies to hit Tier 3 standards on average across the country, but do not require each separate refinery to produce such fuel individually.  But Utah Gov. Gary Herbert has pushed hard for Tier 3 here, including enacting tax breaks a few years ago to help produce it and holding a series of news conferences to praise producers when they finally offer it. Herbert’s budget this year also called for essentially a consumer gasoline revolt, urging Utahns to buy only Tier 3 gasoline to prod refineries that do not yet produce it to do so soon.  Lawmakers in the recent session passed and Herbert signed SB239, that extends the deadline for refiners to claim a sales tax break for producing cleaner fuel. The move is estimated to save the refineries some $500,000 in taxes beginning next year.  Herbert praised HollyFrontier’s announcement on Thursday, and he repeated some of his favorite reasons for promoting the low-sulfur fuel. “The largest contributor to our air quality problem is mobile sources — vehicles,” he said in a news release. “When coupled with a Tier 3 car, the fuels that will be produced at HollyFrontier’s Woods Cross refinery will reduce these mobile emissions by up to 80%. That’s like taking four of five cars off the road.”  Even with older cars, Tier 3 reduces up to 14% of the emissions, which is like parking a car one day a week.  White, with HollyFrontier, said the company supports efforts by Herbert and legislative leaders to “improve air quality in Utah and along the Wasatch Front, in particular.” White added, “HolyFrontier Woods Cross cares about the environment and the air quality in the community, which is also home to many of our employees and their families.”  House Speaker Brad Wilson tweeted his support for the move. “I applaud HollyFrontier’s announced plan today to make Tier 3 fuels produced in Woods Cross, Utah, available to consumers along the Wasatch Front," he said.  Thom Carter, executive director of the Utah Clean Air Partnership, also praised HollyFrontier for its move to produce Tier 3 fuel.  “In our efforts to clean the air, there are no perfect answers, but there are practical solutions,” he said. “HollyFrontier’s move to produce Tier 3 fuel here in Utah will mean a significant reduction of emissions in our airshed.” 

Tier 3 from Utah refineries is currently sold at stations including Speedway, Chevron, Shell, Texaco and Exxon. Also, many independent stations — including such large chains as Maverik, Costco and Smiths — buy from the refineries that produce Tier 3, but also from the refineries that do not.  Rep. Suzanne Harrison, D-Draper, recently launched a website, tier3gas.org, to show where stations are that certify they sell Tier 3 fuel.

By www.sltrib.com

April 2, 2020:

The world is about to run out of oil storage and U.S. shale producers are selling crude for almost nothing but they are still refusing to shut production, hoping to survive the storm, one of the world’s biggest oil traders said.  The continuing production shows the challenges that Russia and Saudi Arabia are facing in their attempt to reduce competition from U.S. shale via low prices, Marco Dunand, chief executive of Mercuria Energy Group, said.  “In the United States, we are buying at levels close to zero but because of various pipeline, bank commitments they continue to sell. They keep on going because they hope when demand is back, they can come back to life. So shale is very resilient,” Dunand told Reuters in a phone interview.  Around 3 billion people are in lockdown worldwide. Gasoline and jet fuel demand have collapsed with airlines grounding their fleets, leaving financial and oil markets reeling in shock.  The United States could already be in recession judging by its record high 6 million jobless claims.  “Compared to a week ago, we had demand destruction going from 10 to 30 million barrels a day (bpd) so we’re not in a normal market. If you have an unknown prediction of 20 million barrels - nothing means anything anymore,” he said.  “We think refinery runs are down 15 million a day conservatively. Empirically, demand should be down 20 million barrels or more.” 

When previously a supply change of 1 million bpd seemed huge, Dunand considered current production cuts “very small” at an estimated 2 million bpd globally, largely from Canada and the United States. Global oil demand is just under 100 million bpd.  Record low prices on different grades and products have become the new norm in the oil industry.  “OPEC, Russia and the United States what can they really do? Can they cut 10 million a day?” Dunand said.  On Thursday, Trump tweeted that he expected Russia and Saudi Arabia to announce production cuts of 10 to 15 million bpd, and his comments sent oil futures up 47%, a record gain, before resettling around $30 a barrel. [O/R]  The OPEC+ crude oil exporter group will debate cutting global supply by 10 million bpd, an OPEC source said on Friday. An emergency OPEC+ meeting is planned for April 6 and will be held as a video conference.  Meanwhile the true price for physical crude cargoes is much lower, in some cases zero or negative.  Dated Brent, the benchmark used to price more than half the world’s physical oil, served a harsh reminder when it fell $10 below futures on Wednesday.  Majors, traders and refiners are scrambling to sell what oil they have on contract and secure dwindling storage, the limits of which also see a range of estimates from analysts and top traders. The world is about to run out of oil storage and U.S. shale producers are selling crude for almost nothing but they are still refusing to shut production, hoping to survive the storm, one of the world’s biggest oil traders said. 

The continuing production shows the challenges that Russia and Saudi Arabia are facing in their attempt to reduce competition from U.S. shale via low prices, Marco Dunand, chief executive of Mercuria Energy Group, said.  “In the United States, we are buying at levels close to zero but because of various pipeline, bank commitments they continue to sell. They keep on going because they hope when demand is back, they can come back to life. So shale is very resilient,” Dunand told Reuters in a phone interview.  Around 3 billion people are in lockdown worldwide. Gasoline and jet fuel demand have collapsed with airlines grounding their fleets, leaving financial and oil markets reeling in shock.  The United States could already be in recession judging by its record high 6 million jobless claims.  “Compared to a week ago, we had demand destruction going from 10 to 30 million barrels a day (bpd) so we’re not in a normal market. If you have an unknown prediction of 20 million barrels - nothing means anything anymore,” he said.  “We think refinery runs are down 15 million a day conservatively. Empirically, demand should be down 20 million barrels or more.”  When previously a supply change of 1 million bpd seemed huge, Dunand considered current production cuts “very small” at an estimated 2 million bpd globally, largely from Canada and the United States. Global oil demand is just under 100 million bpd.  Record low prices on different grades and products have become the new norm in the oil industry.  “OPEC, Russia and the United States what can they really do? Can they cut 10 million a day?” Dunand said.  On Thursday, Trump tweeted that he expected Russia and Saudi Arabia to announce production cuts of 10 to 15 million bpd, and his comments sent oil futures up 47%, a record gain, before resettling around $30 a barrel. [O/R]  The OPEC+ crude oil exporter group will debate cutting global supply by 10 million bpd, an OPEC source said on Friday. An emergency OPEC+ meeting is planned for April 6 and will be held as a video conference.  Meanwhile the true price for physical crude cargoes is much lower, in some cases zero or negative.  Dated Brent, the benchmark used to price more than half the world’s physical oil, served a harsh reminder when it fell $10 below futures on Wednesday.  Majors, traders and refiners are scrambling to sell what oil they have on contract and secure dwindling storage, the limits of which also see a range of estimates from analysts and top traders. 

By Reuters

April 2, 2020:

Kuwait National Petroleum Company (KNPC) has started operating three new production units related to its clean fuels project at the Al-Ahmadi refinery, a company spokesman told the KUNA state news agency on Thursday.

By Reuters

April 2, 2020:

A brief loss of power forced Royal Dutch Shell Plc to shut the coker at its 225,300 barrel-per-day (bpd) Norco, Louisiana, refinery early on Thursday, said sources familiar with plant operations. Shell is working to restart the 25,000-bpd coker, which was shut shortly after 1 a.m. CDT (0600 GMT) on Thursday. Shell spokesman Ray Fisher said units in the refinery and Shell’s adjoining chemical plant were affected by the power loss. He declined to say which units were affected at the Norco complex. The coker converts residual crude oil from distillation units into feedstock for motor fuels or petroleum coke, a coal substitute. An olefins unit in the chemical plant was also affected by the power loss, according to the sources.

By Reuters