Message-ID: <1669836.1075856597901.JavaMail.evans@thyme> Date: Fri, 15 Dec 2000 03:14:00 -0800 (PST) From: webmaster@cera.com Subject: Refined Products Line--North American Markets - CERA Alert: Decem ber 15, 2000 Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: "Webmaster@cera.com" X-To: X-cc: X-bcc: X-Folder: \Vincent_Kaminski_Jun2001_5\Notes Folders\Cera X-Origin: Kaminski-V X-FileName: vkamins.nsf 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 Y2K 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** This CERA Alert will be available in PDF format within 24 hours. ********************************************************************** This electronic message and attachments, if any, contain information from Cambridge Energy Research Associates, Inc. (CERA) which is confidential and may be privileged. Unauthorized disclosure, copying, distribution or use of the contents of this message or any attachments, in whole or in part, is strictly prohibited. Terms of Use: http://www.cera.com/tos.html Questions/Comments: webmaster@cera.com Copyright 2000. Cambridge Energy Research Associates