Help is On the Way for Diesel Supplies, an Industrial Info News Alert


The supply-side squeeze for distillates has been a growing concern in the run-up to the busy holiday shopping and shipping season, but a resurgence of refinery activity suggests a major crisis will be averted.

Data from the U.S. Energy Information Administration (EIA), part of the Department of Energy (DOE), show refineries were operating at about 90.6% of their peak capacity during the week ending October 28, a slight improvement from the week prior.

Refinery activity is a key element of the supply-side equation, as crude oil by itself is more or less useless–it’s what comes out of the refineries that matters in the real world. Refinery activity for the week ending October 28 translated to distillate production of 5.1 million barrels per day (BBL/d), an increase of 100,000 BBL/d from the prior week.

That’s not much of an increase–last year at this time, daily distillate production increased by 2.2 million barrels. It only adds to the fear of major supply shortages, particularly for an East Coast market that relies heavily on imported products–both from domestic and foreign sources–to satisfy demand.

The big fear factor was that there may be only a month’s worth of supply left in the domestic market just as the holidays approach. Distillates include diesel, and without diesel, there’s not much available to power the world’s shipping fleets.

Supplies are indeed short–EIA data show distillate inventories are 19% below the five-year average for this time of year. At this point last year, they were about 5% below the five-year average.

Resurgent demand from the worst of the COVID-19 pandemic has strained existing refining capacity and, to make matters worse, the U.S. market has seven fewer refineries in operation than it did in 2019.

Meanwhile, the domestic market is just starting to recover from a period of refinery outages for both planned and unplanned maintenance. Rommel Oates, the founder and chief executive officer Refinery Calculator Incorporated (Refinery Calc), a Houston, Texas-based strategic partner of Industrial Info, said units yielding distillates in at least four refineries should return to service by the end of the year.

“Elsewhere, refineries are adjusting their crude oil processing conditions and slightly switching their slates in order to improve distillate production,” he said.

Data from Industrial Info and Refinery Calc show distillate production in the East Coast, known in the industry as PADD 1, could improve by about 4% from week-ago levels to reach 263,000 BBL/d. By the first week of December, PADD 1 could see distillate production increase by almost 10% from the week ending November 4 to reach 275,000 BBL/d.

And those are the low-end estimates from one PADD that can barely satisfy its own demand. All told, Refinery Calc expects total U.S. distillate production will reach about 5.3 million BBL/d by December 2, a near-5% improvement from current levels.

The nature of the domestic U.S. market and the inter-relationship between the various PADDs mean the East Coast market–PADD 1–still will need to lean on foreign suppliers at times, given the limits to existing pipeline capacity.

But Hillary Stevenson, an oil market correspondent for Industrial Info, said that by December, all of the maintenance for diesel units in the domestic refinery sector will have been completed, just in time for the holiday season.

“Help is indeed on the way,” she said. “IIR’s data shows that diesel production has been ramping up since mid-October, when offline capacity hit a peak due to planned and unplanned outages.”

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR’s Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD). Click here for more information on IIR!

SOURCE Industrial Info Resources, Inc.