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Extreme weather shut down the Trans Mountain pipeline this
November, creating a warning signal for Canadian crude prices as
Alberta storage is already at high levels.
The US SPR sale will be the largest ever and conducted in
parallel with releases by other major energy-consuming nations. Our
balances show that the stock release will contribute to a
stabilization of US commercial crude oil inventory levels
US Midwest/Midcontinent light, sweet crude supply remains
tight. Refineries are at nearly full utilization while supply
outside of the Permian Basin remain stagnant to declining. This
potentially sets the stage for a resumed drawdown of PADD 2
inventories, which could put pressure on the Brent-WTI spread to
narrow and keep more crude supply from being exported.
Figure 1: Monthly US Crude Oil Production
Refined product markets
Phillips 66 Alliance shutdown removes 255,000 b/d of refining
capacity from the US Gulf Coast. Refinery utilization was already
forecasted to be at maximum during the summers of 2022 and 2023 so
this shut-down should modestly tighten the US refined product
balance.
Gasoline and distillate cracks spreads have weakened from their
October levels as refiners exited the fall maintenance season
though low product stocks, continued demand recovery and the
shutdown of Alliance refinery are providing some countering
support.
Persistently high retail gasoline prices may dampen demand
recovery. Over the last month, Brent prices have reached their
highest levels since 2014, and retail gasoline prices have
followed, also achieving multi-year highs. Some of the negative
impact we typically see from elevated prices may be offset by
pent-up demand and less price sensitivity for road travel coming
out of a pandemic. For now, our gasoline demand outlook has been
reduced by about 1% for both 2022 and 2023, but we continue to
monitor the situation.
Surging TSA passenger traffic supports strong jet fuel demand
outlook, but the Omicron variant remains an unquantified risk at
this point. The Omicron driven flight bans from southern Africa
only have a nominal impact to US jet fuel demand. Our outlook
assumes no further restrictions are imposed
