Analysis: U.S. Product Exports Set New Record, EIA Says


   
Karim Bastati
DTN Analyst

   VIENNA (DTN) -- U.S. refined product exports last week soared to the highest 
on record, Energy Information Administration data published Wednesday (4/1) 
revealed. International demand for U.S. petroleum products has picked up 
measurably as refiners and consumers worldwide scramble to replace shut-in 
Middle East supply and reduced Asian production.

   Total product exports in the week ending March 27 increased just over 
300,000 bpd from the previous week's three-month high 7.6 million bpd, on the 
back of soaring distillate fuel oil exports that clocked in at more than 1.4 
million bpd. Over the past four weeks, U.S. product exports averaged 7.36 
million bpd, up 14% year-on-year.

   The now month-long de facto closure of the Strait of Hormuz has not only 
shut in some 5 million bpd of refined products, mostly in the form of middle 
distillates like diesel and jet fuel, but also forced refiners dependent on 
Middle Eastern crude to throttle production as oil flows from the Persian Gulf 
to Asia ebbed to a trickle. China, a main fuel supplier to countries in East 
Asia, is likely to extend its ban on refined fuel exports, in place since March 
12, into April.

   A tight global distillate market and high margins have incentivized domestic 
refiners to maximize operations since the second half of last year. Despite 
losing refining capacity, net crude inputs have since then consistently hovered 
around 4% above year-ago levels.

   The current crisis is set to exacerbate this trend. While input costs for 
U.S. refiners have increased amid soaring prices, the rise was much more muted 
than for refiners in Europe and Asia. Domestic fuel producers can rely on 
relatively cheap homemade natural gas for the energy-intensive desulfurization 
process required for diesel and other middle distillates, and crude oil prices 
on U.S. spot markets have ballooned by less than the international average.

   Given a similar phenomenon taking place in fuels prices, this widening 
arbitrage window is likely to draw more refined barrels from the U.S. to Europe 
and Asia. The surge in freight costs for clean tankers carrying refined U.S. 
products to Europe since the start of the U.S.-Israeli war on Iran indicates 
the demand for such cargo. Clean tanker rates from the U.S. East Coast have 
surged 90%, while those from the U.S. Gulf Coast have more than doubled.




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