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US Product Market in April 2014

Source: OPEC 4/17/2014, Location: North America

US gasoline demand stood at around 8.8 mb/d in March, around 470 tb/d higher than the previous month and up by 180 tb/d from the same month a year earlier. Despite the recovery in domestic demand, gasoline cracks trended lower due to pressure from the supply side due to higher production as refineries shifted to producing gasoline, rather than distillates, ahead of the driving season and increasing imports to the region. The USGC gasoline prices dropped, thus widening the arbitrage to the USEC, but the staggered shift to summer-specification product limited the opportunities, while companies sold off winter-grade product, adding pressure to the supply overhang. On the other hand, easing Latin American gasoline demand weighed on USGC prices, with Mexican demand slowing this spring. The gasoline crack spread fell $2 to average $26/b in March.

Middle distillate demand stood at around 3.8 mb/d in March, some 170 tb/d higher than the previous month and 10 tb/d above the same month a year earlier. In the middle of the barrel, US gasoil continued losing ground over March with USEC heating oil demand falling as temperatures in the region climbed, thus reducing the support seen by the severe winter conditions in the previous months. Losses were capped due to USGC exports rebounding and halted increases in inventories during March. Distillate yields remained relatively low, staying under 30%, as refineries turned to gasoline. The lower distillate prices encouraged exports, and more than 30 diesel cargoes were scheduled to load in the USGC with the main destinations being Latin America (Argentina, Brazil, Colombia, the Dominican Republic, Ecuador and Mexico), Europe and West Africa. The USGC gasoil crack dropped $1 to average around $19/b in March.

At the bottom of the barrel, the fuel oil crack showed a mixed performance with the market continuing to tighten due to a lack of low-sulphur fuel oil supplies on the USEC with imports from Europe decreasing. However, increasing temperatures reduced demand from power utilities, in line with seasonality, and despite the need to replenish natural gas stocks, lending some support to the USEC fuel oil market, low-sulphur fuel oil cracks fell, weighed down mainly by a seasonal drop in heating fuel demand. The fuel oil crack in the USGC exhibited a loss of $1 to average 60¢/b during March.

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