The winter storm has sucker punched Texas, where severe winters are a rare sight, and has suspended the petroleum industry chain of the state that induced a sizeable void in the production capacity of oil refining for the US, which resulted in a chaotic status for the global tanker shipping as tankers carrying crude oil are now turning around swiftly. Simultaneously, the global market is currently targeted at the exports of gasoline and diesel to the US in order to replenish the void derived from the halted production of oil refining in Texas.
The raging of the winter storm has ceased production of petroleum and natural gas for West Texas, and eradicated 1/5 of production capacity for oil refineries in the US that generated a significant supply void that needs to be replenished, which has elevated the total import of diesel to 380K barrels/day during February for the East Coast of the US. The figure ties the record of November 2020, and is also the highest level over past several years, of which the 140K barrels came from Northeastern Europe is also the largest figure over the years. The import figure for March is also expected to be relatively compelling at 2.5 million barrels.
There has also been a drastic reduction in the volume of gasoline from the Gulf Coast, where the average on the 10th had arrived at 1.3 million barrels, which equals the low point during May 2020 that was attributable to the pandemic. In comparison, the figure was at 2.5 million barrels during February 2020. The void created by more than a million barrels will also be replenished by imports, and that is why the import of gasoline from Europe has been simultaneously magnified in northeastern US, where 417K barrels of gasoline and gasoline mixture were imported between 1st and 18th of February, which is the highest level since July 2020, and is 27% higher than the average for the past 3 months.
The issue of supply and demand has manifested on the prices, where the crack speed of the US had arrived at US$15.43 on February 18th, which is the high point since April 2020. The higher the crack spread is, the better the profit is for oil refineries, and the insufficient production capacity has generated interested of oil refineries from other areas of the world to provide an endless stream of products for the country that will also elevate the prices in other regions at the same time. The crack spread of gasoline has reached to US$4.5/barrel, and is the highest point since October 2020.
The oil tankers that were headed to Texas have sailed away from the state swiftly since they won’t be able to take delivery due to the suspension of oil refineries in the state, and have marched towards locations with operating oil refineries without looking back.
The winter storm in Texas has resulted in a chaotic state for the global shipping where crude oil is leaving the state while gasoline and diesel are flooding into the US, which indicates the importance of Texas in terms of the energy provision of the country.
(Cover photo source: shutterstock)