September 10, 2021

Southern Louisiana Struggles to Get Back to Normal

Nearly 255,000 Louisiana residents remain without power, an improvement from half a million several days ago. Nonetheless, the city of New Orleans proper and the broader economic corridor up the Mississippi River has many months of clean-up ahead. As of Saturday, September 3rd, the US Department of Energy reported some 1 mbd of throughput capacity remained offline, albeit it is hard to assess changes since these totals were released. According to the EIA weekly data release, refinery throughput took a dive in week-ending September 3rd with PADD 3 managing runs of just 7.1 mbd, a decline of 1.57 mbd against week earlier levels.

Given the plethora of outages, it is of little surprise that US seaborne clean product departures out of southern Louisiana have struggled to resume. On September 7th, the Naeba Galaxy and Kim M. Bouchard managed to load a combined 131 kb in clean product volume, ending a streak of 10 days without any departures. Such a gap in exports is noteworthy. Over the past half decade, a loading disruption of more than three days out of southern Louisiana has only taken place a handful of times. Problems are set to continue. AIS signalling indicates that the next loading will not take place until September 10th, albeit questions remain around specific timing. Through the first half of 2021, departures out of southern Louisiana finished at 424 kbd and thus, recent weakness marks a significant disruption to international clean product trade flows.

Latin America is the biggest recipient of clean products out of southern Louisiana. Through the 1H 2021, departures towards the region finished at 347 kbd, accounting for 82% of total exported volume. Most of these barrels were diesel and gasoil, with smaller amounts of gasoline and naphtha also present. The recent cut in volume has had a disproportionate impact on barrels headed towards Mexico and Brazil, the two largest purchasers of clean products out of southern Louisiana. Through the first week of September, Russia responded, shipping a combined 195 kbd towards both countries, the highest seven-day average year-to-date.

The likes of Houston and Beaumont/Port Arthur, the first and third largest ports for US seaborne clean product departures respectively, have failed to make up the difference. Combined exports out of these two ports finished the first week of September at 1.09 mbd, down against the full August average (1.2 mbd). Nonetheless, Lake Charles, which was able to avoid the worst of Ida given the port's location well to the west of Ida's landfall, realized an increase in clean product departures of some 100 kbd through the first week of September, a sign that infrastructure at that location is not having any issues continuing to operate as normal.

US gasoline stocks take a hit as refinery outages cause big draws in onshore inventories through PADDs 1 and 3

The weakness in refinery throughput had a real impact on domestic gasoline inventories. According to the EIA, week-ending September 3rd saw US stocks finish at just 220 mb, marking a decline of 7.2 mb w/w, pushing inventories to hold at some 5.7 mb under the 5-year seasonal average. Unsurprisingly, these draws were centered in PADD 1 (-3.16 mb w/w) and PADD 3 (-3.58 mb w/w). In total, gasoline inventories are now holding at the lowest level since late-2019 when stocks pushed to 217.2 mb.

The gasoline draw through PADD 1 is especially notable, reflecting the brief closure of the Colonial Pipeline, a move taken as a precautionary measure that was quickly reversed once Ida had passed. The voyage time between international refining centers, namely Europe, and the US East Coast also prevented US purchasers from taking additional volume from abroad to make up for shortfalls in domestic production. Ida developed far too quickly to allow the delivery of extra physical cargoes into USEC tank farms ahead of landfall. Clean product arrivals into New York finished at 538 kbd through the first week of September, up only slightly against the full month of August (506 kbd) and well below peak levels above 600 kbd realized through May of this year.

Figure 1 - Daily southern Louisiana seaborne clean product exports (kbd)
Figure 2 - Daily New York seaborne clean product imports by year (kbd, 7-day moving average)

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