MOSCOW (MRC) -- U.S. gasoline refining margins fell a whopping 95% on Monday - even briefly turning negative - with the cost of gasoline plunging faster than crude oil in anticipation that the coronavirus will keep people off the road and in their homes, said Hydrocarbonprocessing.
The coronavirus pandemic has infected 180,000 people worldwide and caused over 7,000 deaths, prompting governments to order travel restrictions and business closures.
U.S. gasoline demand is plunging as businesses shut and state and local governments advise people to stay home. U.S. gasoline refining margins RBc1-CLc1 settled at 28 cents per barrel on Monday, their lowest since December 2008, another signal that economic activity appears to be contracting.
“Oil prices have been dropping hard enough. For product prices to outpace them signals a huge shift in demand expectations,” said Matthew Smith, director of commodity research at ClipperData. Refiners process crude oil into a number of products, chiefly motor gasoline, heating oil and diesel fuel. Normally, gasoline margins rise as driving season approaches, and distillate margins - for making heating oil and diesel - rise in the winter months.
The United States consumes about 9 million barrels per day of motor gasoline, but fuel demand is now expected to fall by roughly 2 million to 2.5 million bpd in the next three to four weeks, said Per Magnus Nysveen, senior partner at Oslo-based energy research firm Rystad Energy.
Congestion in major cities worldwide has been dropping sharply, according to TomTom, which makes navigation technology. Headed into the evening rush hour on Monday, congestion in New York City was down by 37% from last year’s average. In Chicago, it was down 24%.
Such declines have not yet shown up in U.S. official data. As of March 6, the four-week average for motor gasoline supplied by refiners - a proxy for demand - was up 1.7% from the year-ago period, according to U.S. Energy Department figures.
The margin to produce distillate products is at USD14.95 a gallon, a relatively healthy margin. Heavy-duty tractor-trailers use diesel, a sign that traders believe demand for shipped goods will be less affected as people take deliveries at their homes.
As MRC informed earlier, Saudi Arabia has stepped up efforts to squeeze Russia’s Urals oil grade out of its main markets by offering its own cheap barrels instead after their long-standing deal to support global oil prices fell apart, reported Reuters with reference to seven oil sources. Cooperation between Moscow and Riyadh dramatically collapsed last week after Russia refused to support deeper oil output cuts desired by Saudi Arabia to fight falling oil demand as a result of the spread of the coronavirus outbreak.
As MRC informed before, in October 2018, Saudi Aramco and Total launched engineering studies to build a giant petrochemical complex in Jubail. Announced in April 2018, the world-class complex will be located next to the SATORP refinery, operated by Saudi Aramco (62.5%) and Total (37.5%), in order to fully exploit operational synergies. It will comprise a mixed-feed cracker (50% ethane and refinery off-gases) - the first in the Gulf region to be integrated with a refinery - with a capacity of 1.5 million tons per year of ethylene and related high-added-value petrochemical units. The project represents an investment of around USD5 billion and is scheduled to start-up in 2024.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 215,390 tonnes in the first month of 2020, up by 23% year on year. Shipments of all grades of high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) increased due to higher capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 127,240 tonnes in January 2020, up by 33% year on year. ZapSibNeftekhim's homopolymer PP accounted for the main increase in shipments.
MRC