Subject: refined products line - - north american markets - cera alert : decem
ber 15 , 2000
cera alert : december 15 , 2000
title : refined products line - - north american markets
cera knowledge areas : refined products
us margin highlights
* responding to falling apparent demand and rising primary inventory levels ,
us gulf coast unleaded gasoline margins versus wti fell by $ 2 . 26 per barrel
to average $ 1 . 45 per barrel during november . gasoline margins have returned
to a historically normal range after spending the summer of 2000 at
exceptionally high values . cera expects gasoline margins to wti to average
$ 2 . 75 per barrel during the first quarter of the new year , $ 1 . 16 per barrel
lower than this year ' s first quarter average .
* high sulfur no . 2 fuel oil differentials with wti dropped slightly ,
averaging $ 5 . 97 per barrel in november . despite the drop of $ 0 . 37 per barrel
from october ' s average , fuel oil differentials remain at unprecedented
values - $ 4 . 20 per barrel higher than a year ago and $ 3 . 46 per barrel greater
that the previous five - year average . for the first quarter of 2001 , cera
anticipates distillate margins to moderate somewhat but remain at a record
high level of $ 4 . 75 per barrel in the first quarter .
* jet / kerosene differentials versus wti rose $ 0 . 63 per barrel from the
october average , reaching a whopping $ 8 . 59 per barrel in november . in
correspondence with the distillate market , jet / kerosene margins are at
historically high levels and receiving support from relatively tight
fundamentals . cera expects jet / kerosene margins to moderate somewhat in the
first quarter in response to seasonal weakening of demand following the
holiday travel season but to remain exceptionally strong at an average of
$ 5 . 75 per barrel .
* margins for us gulf coast 1 % sulfur residual fuel dropped by $ 2 . 15 per
barrel , reaching $ 3 . 99 per barrel below wti during november . despite the
recent widening of differentials , cera expects soaring natural gas prices to
support relatively narrow residual fuel differentials throughout the winter
months . residual fuel differentials are expected to average $ 2 . 50 per barrel
below wti during the first quarter of next year , at the high end of the
historical range .
us demand highlights
* apparent demand for unleaded gasoline fell seasonally by about 0 . 5 million
barrels per day ( mbd ) from the october level , reaching 8 . 36 mbd for the four
weeks ending december 8 . demand is averaging less than 1 percent below last
year largely because y 2 k concerns helped inflate december demand a year ago .
cera anticipates gasoline demand to continue to decline seasonally as colder
temperatures arrive , averaging 8 . 08 mbd during the first quarter of 2001 .
* reported distillate apparent demand remains exceptionally strong at 3 . 94
mbd for the four weeks ending december 8 , over 7 percent greater than this
time last year . this represents a slight increase of about 0 . 05 million
barrels ( mb ) from the end - october level of 3 . 90 mb , but still a record high
level for early december . with support from low home heating oil inventories ,
particularly in the northeast , distillate demand has been very strong during
the fall of 2000 . cera expects demand to remain strong in the coming winter
months , averaging 3 . 79 mb during the first quarter of next year .
* apparent demand for jet fuel declined by 5 percent from the october level
to reach 1 . 68 mbd for the four weeks ending december 8 . despite the decline ,
apparent jet fuel demand is over 1 percent above the year - ago level . the
relative strength of jet fuel reported demand continues to parallel
distillate demand strength with support coming from the use of jet fuel to
help mitigate the tight distillate market fundamentals . cera expects the
demand for jet fuel to average 1 . 81 mb during the fourth quarter .
* reported demand for residual fuel dropped to 0 . 87 mbd for the four weeks
ending december 8 , a decline of about 0 . 09 mbd from the october average and a
slight increase over the november level . demand for residual fuel is
currently 11 percent greater than last year , and surging natural gas prices
are expected to result in continued strong residual fuel demand throughout
the winter . residual fuel demand is expected to remain in the 0 . 85 to 0 . 9 mbd
range during the first quarter of 2001 .
us inventory highlights
* primary inventories of unleaded gasoline rose to 196 . 5 mb , increasing
almost 10 mb from the end - october value . responding to rising stock levels
and declining apparent demand , forward supply coverage of gasoline climbed to
23 . 5 days for the four weeks ending december 8 . forward supply is 2 . 5 percent
below last year ' s level at this time of year and at its lowest level in the
past eight years - although cera still believes coverage is currently
sufficient for the level of demand expected this winter . however , cera is
looking cautiously at the implications of high distillate refinery yields and
production because of the possibility of low gasoline inventories at the
start of the driving season in the second quarter of next year .
* distillate inventory coverage has remained about level since the end of
october at 29 . 2 days of forward supply for the four weeks ending december 8 .
despite record high apparent demand , strong refinery production levels helped
boost primary distillate inventories slightly , to 115 . 3 mb for this period .
primary stocks are 16 percent below last year ' s level at this time and at
their lowest historical level ever . although stocks are low , cera does not
anticipate shortages to occur this winter . assuming normally cold weather ,
refinery production and net imports are expected to be capable of meeting
demand requirements - albeit at a high price .
* jet fuel inventory coverage crept upward by about 1 day of coverage , to
reach 25 . 7 days of forward supply for the four weeks ending december 8 . this
moves jet fuel coverage above the 23 . 5 to 25 days ' supply range that it had
been in for the past four months . the rise of just under 1 day in forward
supply was mainly a response to a decline in apparent demand . jet inventories
and coverage are expected to become tighter in the coming weeks as the pull
from tight distillate markets strengthen , but supplies are expected to be
adequate for the winter .
* inventory coverage of residual fuel rose by almost 4 days of forward supply
from october , reaching 41 . 7 days of forward supply during the four weeks
ending december 8 . the increase in coverage was a temporary response to a
drop in demand and an increase in stocks . with demand expected to strengthen
because of colder weather and high gas prices , cera looks for inventories and
coverage gradually to decline in the coming weeks .
* * end * *
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