Supply disruptions and increasing demand boosted U.S. petroleum product imports in March
Imports of petroleum product into the United States increased in March 2021 as a result of increased demand, temporary unplanned refinery outages in the U.S. Gulf Coast, and high U.S. petroleum product prices compared with prices in Europe. According to our May Petroleum Supply Monthly (PSM), which includes complete petroleum product import data through March 2021, U.S. petroleum product imports averaged 2.5 million barrels per day (b/d) in March, the highest average for any month since July 2019 (Figure 1). According to data from our Weekly Petroleum Supply Report (WPSR), this increase in petroleum product imports continued through April and May, likely as a result of increasing petroleum product demand, high U.S. petroleum product spot price spreads with Europe, and the Colonial Pipeline outage. The four-week rolling average for U.S. petroleum product imports was 2.8 million b/d as of the week ending May 28, 2021.
The increase in petroleum product imports in March was concentrated in the East Coast (PADD 1). The East Coast, which accounted for 49% of U.S. petroleum product imports from 2011 to 2020, imported 1.4 million b/d of U.S. petroleum product imports in March, 57% of the total for the month. Petroleum product imports received in the East Coast in March reached their highest level since May 2011 and were 54% higher than the five-year (2016–2020) average for March. The East Coast received 44% more petroleum product imports in March than in February and 66% more than a year ago.
U.S. petroleum product imports into the East Coast were high in March because of high distillate imports and increases in imports of gasoline and other petroleum products (Figure 2). In March, U.S. distillate imports into the East Coast were 421,000 b/d, the highest March level since 2003. Meanwhile, at 737,000 b/d, gasoline imports into the East Coast reached their highest level since August 2019 and their highest March level since 2009, while imports of other petroleum products (including jet fuel, propane, residual fuel oil, and other oils) increased to 280,000 b/d, their highest level since January 2020. According to WPSR data, April and May distillate imports into the East Coast decreased, which is normal for this time of year because distillate demand decreases in warmer months, and gasoline imports have remained high, which is also seasonally normal.
The increase in petroleum product imports into the United States has been due, in part, to short-term factors such as reduced domestic supply, increased domestic demand, and low gasoline inventories. The extreme winter weather in February 2021 disrupted operations at several refineries in the U.S. Gulf Coast, where more than half of total U.S. refinery capacity is located, and particularly in Texas, where 5.9 million b/d (approximately 31%) of capacity is located. Meanwhile, U.S. gasoline consumption increased to 8.6 million b/d in March, the highest level since February 2020 and only 7% lower than the March 2019 level of 9.2 million b/d. Distillate consumption also increased in March to 4.0 million b/d, the highest level since November 2019 and only 4% less than the March 2019 level of 4.2 million b/d. Because gasoline inventories have also been low, the United States likely relied more than usual on gasoline imports to meet rising demand.
Another short-term factor that has contributed to increased U.S. petroleum product imports is the premium at which U.S. petroleum products have been selling relative to petroleum products in Europe (Figure 3). In March, the New York Harbor gasoline spot price averaged 30 cents per gallon (gal) more than gasoline in Europe, the widest spot price spread between these petroleum products in the past 10 years (2012–2021) and 12 cents/gal more than the December 2016 spot price spread, which, outside of 2021, was the widest spot price spread in those 10 years. Since January 2021, the spread between U.S. and European gasoline spot prices has averaged more than 20 cents/gal, compared with the five-year (2015–19) average premium of approximately 9 cents/gal. The ultra-low sulfur diesel (ULSD) spot price averaged 19 cents/gal more than ULSD in Europe in March, also a 10-year high. Increased U.S. imports of distillate from Europe have been supported by ULSD premiums of more than 10 cents/gal since November 2020, compared with a five-year average premium of less than 7 cents/gal, and ULSD premiums of more than 15 cents/gal since February 2021. The premiums at which New York Harbor petroleum products have been selling relative to Northwest Europe petroleum products have made it more economical to import petroleum products from Europe to fill some of the void left from disrupted U.S. refining and increasing domestic demand. The high premiums also contributed to record-high petroleum product imports to the East Coast from Russia, for which we began collecting data in 1995, and the highest petroleum product imports from Netherlands since June 2008.
The increase in petroleum product imports is also a result of reduced refining capacity in the East Coast after the 335,000 b/d Philadelphia Energy Solutions (PES) refinery closed in June 2019. We estimated that closing the Philadelphia refinery would reduce East Coast gasoline supplies by approximately 160,000 b/d and distillate supplies by approximately 100,000 b/d. Prior to the PES refinery closure, East Coast gross inputs into refineries exceeded 1.0 million b/d most months, but following the closure, inputs to refineries have been much lower (Figure 4). From July 2019 to December 2019, the first six months after the PES refinery closed, East Coast gross inputs to refineries averaged 821,000 b/d. In the past 12 months of complete data (April 2020–March 2021), reduced refinery utilization of other East Coast refiners in response to the COVID-19 pandemic has contributed to the decrease in East Coast refining. Because the East Coast consumes significantly more petroleum products than regional refineries produce, the region relies on imports and supplies from the U.S. Gulf Coast via pipeline. When production is disrupted in the U.S. Gulf Coast (as was the case in February and March 2021), the East Coast relies more on imports to meet its petroleum product demand.
Although WPSR data show that U.S. petroleum product imports increased to an average of 2.8 million b/d for the four weeks ending May 28, this was likely due to strategies to manage supply during the Colonial Pipeline outage and does not reflect the long-term trend of increasing petroleum product imports into the United States. Overall, the increases in U.S. refining activity suggest that U.S. petroleum product imports could decrease from March’s high levels in the coming months, depending on how much U.S. consumption increases. According to WPSR data, crude oil inputs to refineries surpassed 15 million b/d the week ending April 2, the first time since March 2020, and weekly volumes have since averaged more than 15 million b/d. In comparison, crude oil inputs to refineries were less than 10 million b/d for the week ending February 26 due to closures and disrupted operations from the cold weather, and they remained low for much of March, contributing to the higher imports of petroleum products. We forecast in our May Short Term Energy Outlook (STEO) that crude oil inputs to refineries will average 15.5 million b/d in the second half of 2021. These higher refining levels could contribute to lower petroleum product imports in the remainder of the year unless petroleum product demand increases significantly.
U.S. average regular gasoline and diesel prices increase
The U.S. average regular gasoline retail price increased nearly 1 cent to $3.03 per gallon on May 31, $1.05 higher than the same time last year. The Midwest price increased nearly 4 cents to $2.93 per gallon, the West Coast price increased nearly 3 cents to $3.72 per gallon, and the Rocky Mountain price increased more than 1 cent to $3.16 per gallon. The Gulf Coast price decreased more than 3 cents to $2.72 per gallon, and the East Coast price decreased nearly 1 cent, remaining virtually unchanged at $2.93 per gallon.
The U.S. average diesel fuel price increased less than 1 cent to $3.26 per gallon on May 31, 87 cents higher than a year ago. The Rocky Mountain price increased nearly 2 cents to $3.38 per gallon, the West Coast price increased more than 1 cent to $3.76 per gallon, and the East Coast price increased less than 1 cent, remaining virtually unchanged at $3.24 per gallon. The Midwest and Gulf Coast prices each decreased less than 1 cent, remaining virtually unchanged at $3.20 per gallon and $3.03 per gallon, respectively.
Propane/propylene inventories rise
U.S. propane/propylene stocks increased by 4.1 million barrels last week to 48.2 million barrels as of May 28, 2021, 11.1 million barrels (18.7%) less than the five-year (2016-2020) average inventory levels for this same time of year. Gulf Coast, East Coast, Midwest, and Rocky Mountain/West Coast inventories increased by 2.1 million barrels, 1.2 million barrels, 0.7 million barrels, and 0.1 million barrels, respectively.
For questions about This Week in Petroleum, contact the Petroleum Markets Team at 202-586-4522.