LONDON (March 12, 2014) – Despite the decline in U.S. domestic product demand, the country’s refining utilization levels have increased significantly in the last few years, as foreign requests for U.S. products have grown by approximately 70 percent since 2009, says an analyst with research and consulting firm GlobalData.
According to Carmine Rositano, GlobalData's managing analyst covering Downstream Oil & Gas, the U.S. refining utilization averaged around 83 percent in 2009, increasing to approximately 89 percent in 2013. A 1 percent growth translates into 175 thousand barrels per day (mbd), meaning that America’s 6 percent increase in refining utilization results in one million barrels per day (mmbd) of higher refining runs, the analyst says.
Rositano continues: “Since there is minimal, if any, increase in U.S. oil demand expected over the next few years, keeping product export levels high and maintaining growth is key to the financial health of America’s refining industry.”
GlobalData states that South America is currently one of the main importers of the country’s gasoline and diesel, as the growth in product demand has significantly outpaced product supply increases.
The analyst says: “The closure of both the Aruba and Hovensa refineries in South America, combined with a lack of major refinery expansions and the persistent refining reliability issues, have all played a role in reducing product supply availability in the region.”
America’s Gulf Coast refining industry is also seeing demand from European countries for Ultra Low Sulfur Diesel, which is in a structural product deficit position in the region. Additionally, the US is exporting high volumes of propane and propylene to Asian countries.
With refining utilization at high levels, Rositano believes that the ability to continue increasing product export levels from the US will be based on planned new capacity additions, both for condensate splitters and Crude Distillation Units (CDUs).
“While this will increase product volumes available for exports, competition from other supply sources based on CDU additions in Asia and the Middle East, as well as upgrade units around the world, will determine the profitability and viability to export,” the analyst concludes.
GlobalData is a global research and consulting firm.