Distillates Vulnerable to Supply Shocks Due to Low Stocks

Distillates markets are vulnerable to supply shocks toward the end of the summer with US diesel, heating oil and jet fuel stocks failing to recover from the 10-year lows last year according to Reuters.

• Stocks have not risen despite low demand due to weak trucking and industrial activity. EIA US distillates inventories were last week reported as just over 14% below the seasonal five year average.
• Several refinery issues have prevented the seasonal summer increase in distillate fuel inventories with unplanned outages in June averaged about 550kbpd compared to just 290kbpd in June 2022 according to IIR Energy.
• Phillips 66's Bayway 150kbpd refinery FCC was offline for most of June and July and Marathon Petroleum’s 75kbpd at its Galveston Bay reformer has been offline since a May 15.
• "Low distillate inventories could be a problem if there's flooding or hurricanes that affect refineries this summer," said Hillary Stevenson at IIR.
• The increased costs of carrying inventories due to higher interest rates have also reduced refiner appetite to fill up the storage tanks according to Ernie Barsamian of The Tank Tiger.