With crude oil output in North America raining down on U.S. Gulf Coast refiners, creating a healthy supply and advantaged prices of feedstock, a “tidal wave” of products flowing out of the U.S. will be eager to capture export markets, according to ESAI Energy’s newly published two-year Global Fuels Outlook.Latin American gasoline, European diesel and Asian naphtha and LPG importers will be flooded with larger and competitively priced volumes of refined product from U.S. Gulf Coast refiners during the next two years.

The U.S. should become a net gasoline exporter in 2015, according to ESAI Energy estimates, with output increases in PADD II and PADD III leading to overall U.S. gasoline production gains of 135,000 b/d in 2014 and 110,000 b/d in 2015. Meanwhile, PADD I imports should fall below 500,000 b/d on a yearly basis.

“Product balances in import markets will increasingly drive margins and temper the traditional influence of U.S. supply-demand fundamentals on prices,” said John Galante of ESAI Energy. “Gasoline deficits in Latin America and West Africa, for example, should have a greater influence on fluctuations in prices in the U.S. Gulf Coast.”

Import needs elsewhere already have gained traction in determining U.S. middle distillate prices. ESAI Energy believes global demand growth for diesel of 625,000 b/d in 2015 will be the strongest since 2011. Yet there will also be additional supply converging on Europe, including added volumes from the U.S. that are backed out of Latin America in 2015 as that region also boosts diesel output.

U.S. product exporters will have to look farther afield, to consumers in Asia, to place expanding output of LPG and naphtha, the production of which is set to grow substantially over the next two years as refiners process more oil from U.S. shale resources.

With U.S. refiners taking advantage of discounted domestic crude, run rates will remain high. And the “tidal wave” of exports will make U.S. prices more dependent on overseas demand.
Source: ESAI Energy