U.S. refiners expected the spread of coronavirus to kill demand for gasoline and jet fuel, so they rushed to produce more diesel - but now they are sitting with a glut of that product, too.
FILE PHOTO: Farmer Gerald Wolff pumps diesel fuel into a fuel tank to it take back to his farm in Harper, Kansas, U.S., May 11, 2018. Picture taken May 11, 2018. REUTERS/Nick Oxford
“The jet demand disruption was just so severe that everyone started blending jet into diesel, it caused the diesel yield from refineries to be really at record levels even despite the lower refinery utilization,” said Gary Simmons, chief commercial officer of Valero Energy said during first quarter conference calls.
U.S. distillate consumption is off by 20%, with the four-week average at a seasonal low not seen since 1995, EIA data showed. Investors bullish on the 2020 outlook expect diesel demand to start rebounding by the third quarter as refiners use workarounds to switch more jet fuel into the gasoline pool, according to a summary by Credit Suisse.
Lamp said that refiners can swing about 10% to 15% between gasoline and diesel, while Marathon Petroleum said the refiner can swing approximately 10%.
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