Crude oil exports from the U.S. Gulf Coast resumed March 14, 2016, following a 10-day lull. Since March 14, 2016, about 4.8mn bbls of waterborne shipments have been loaded in the U.S. Gulf Coast bound for Japan, France, UK, Spain, and The Netherlands. The last shipment bound for Canada was loaded in St. James, LA, on March 4, 2016.

Despite these additional destinations, U.S. Gulf Coast export rates have decreased. As of March 25, U.S. Gulf Coast exports averaged 176,000 bpd so far in 2016. In 2015, exports (primarily to Canada before the export ban was lifted earlier this year) averaged 211,000 bpd. New pipeline connectivity to Eastern Canada via Enbridge's 300,000 bpd Sarnia, ON,-to-Montreal, QC, Line 9 pipeline, may have lessened the need for Gulf Coast waterborne shipments to Eastern Canada.

Two tankers are bound for Japan: Agistri and Cape Bari, with nearly 2.0mn bbls of crude. These will mark the first U.S. barrels bound for Japan since the export ban was lifted. Cosmo Oil, a Japanese refiner, booked the Agistri to carry WTI, while TonenGeneral fixed the other vessel, Cape Bari, according to Reuters.

The Agistri loaded about 975,000 bbls in the Galveston, TX, lightering area on March 16, 2016. Cape Bari loaded about 1.0mn bbls on March 14, 2016 at Sunoco Logistic's Nederland terminal. The Cape Bari is expected to arrive on May 8, 2016, followed by the Agistri on May 9, according to Genscape.

Following the two Japan-bound loadings, four shipments loaded in the U.S. Gulf Coast destined for Europe. Enterprise's Houston terminals loaded two vessels: The MT United Honor on March 19, 2016 with 750,000 bbls and the Minerva Georgia on March 19, 2016 with 885,000 bbls. MT United Honor is expected to arrive in Lavera, France, on April 7, 2016. Minerva Georgia is destined for Algeciras, Spain, and is expected to arrive April 4, 2016, according to Genscape. The other two vessels bound for Europe were loaded in Corpus Christi. Overseas Pearlmar loaded at the Valero West terminal on March 19, 2016 with 488,000 bbls; the vessel is expected at Pembroke, UK, on April 5, 2016. SKS Spey loaded nearly 700,000 bbls at the NuStar terminal on March 20, 2016, and is expected to arrive in Rotterdam, Netherlands, on April 7, 2016.

Genscape's North American Waterborne Crude Report subscribers receive a weekly overview of U.S. Jones Act vessel and waterborne crude import volumes moving in the West, East, and Gulf Coasts with market analysis and freight cost assessments. To learn more or request a free trial, click here. Genscape Vesseltracker provides near real-time vessel movement data and is used in the North American Waterborne Crude Report. To learn more about Genscape Vesseltracker, click here.

Additionally, Genscape's U.S. Gulf Coast Crude Supply Chain Service provides oil storage, rail, pipeline, refinery, and vessel movement data and market intelligence for a comprehensive view into the U.S. Gulf Coast supply chain. To learn more or request a free trial, please click here. 

Over the last three months, commodity prices have continued to fall strongly. In March 2016, Brent oil spot prices remained below 42 $/bbl, coal touched a low of 43 $/tonne and TTF gas fell to 11 €/MWh. Simultaneously, carbon prices fell by 40 percent.

This fall in commodity spot prices combined with temperatures above seasonal norms and high wind outputs in Western Europe led to very modest power spot prices during Winter 2015-16, as detailed in Genscape's latest Market Insight report.

The impact of these factors on German and Dutch forward power prices was surprisingly large. Prior to this quarter, power forward curves were only moderately impacted by the downward trend in coal, gas and oil prices. Indeed they appeared to have touched a floor, only moving by 2-3 €/MWh from quarter to another. Over the recent quarter however, we saw a shift of about 6 €/MWh.

This unexpected fall in power prices is partly the result of the latest evolution of the capacity mix, resulting in very little concern on the supply side in Western Europe. As detailed in Genscape’s latest EU Mid-Term Infrastructure report, the installed capacity in Germany and the Netherlands is expected to remain in an oversupply situation until at least the end of 2017. The commissioning of new large wind farms (+860 MW in the Netherlands and +2400 MW in Germany) is compensating planned plant closures. Simultaneously, there is a high confidence in the French adequacy of supply for the coming winters, with RTE approving the closure of the EDF-owned Cordemais and Porcheville. Although this will lead to a meaningful capacity reduction by 2017 (-3.7 GW), these oil-fired units were mostly used as back-up during cold snaps and have been rarely used over the last couple of years.

Using the EPSI Platform for fundamental power market analysis, Genscape has confirmed this combined effect of low commodity prices in an oversupply situation on future power prices. During the coming quarter, the German, Dutch and French markets are expected to converge at about 24.50 €/MWh, significantly below the levels seen one year ago. Summers 2017 and 2018 are expected to see prices hovering around 23-24 €/MWh. The high availability of supply in all the Western European markets will lead to prices converging to the marginal cost of the coal-fired units which will in addition benefit from very modest coal prices.

Great Britain is experiencing a different situation. The market is facing a significant capacity reduction and a shift in generation technology from coal to a mix of renewables, gas and nuclear. 2014 saw the closure of three out of four units at the Ferrybridge site (1470 MW) as well as the Ironbridge-1 plant (370 MW). The last unit of Ferrybridge (490 MW), two units of the Eggborough plant (980 MW) and the Longannet plant (2260 MW) are also stopping commercial operations. The last two units of the Eggborough plant (980 MW) are expected to be closed in March 2017. All of these are coal-fired units. This represents a significant decrease of 6.5 GW in the installed coal capacity. At the same time, by end 2018 only a very small amount of new capacity is expected to come online, mostly consisting of wind farms.

The impact of this capacity reduction is expected to be seen in Winter 2016-17. For this period, despite low gas and coal price forwards, power prices are expected to increase up to 39 £/MWh, about 4-5 £/MWh above the prices seen last winter. Winter 2017-18 is of particular interest as Great Britain's power market starts facing tight market conditions and in Genscape’s latest market report, expected monthly prices are largely above the forward prices and touch a high of 50 £/MWh.

The highlights presented in this blog post have been taken from the latest issue of Genscape's quarterly Market and Medium-Term infrastructure reports. Each quarter, Genscape leverages the knowledge of its team of field technicians who install and maintain monitoring equipment all around Europe and the EPSI power plant database to put in perspective recent changes (new announcements, monitored activity) for the main European markets. The impact of these changes and the latest market events are analyzed using the EPSI Platform to produce updated scenario results for Germany, France and the Netherlands, delivering valuable market insights. In addition, a special focus country is explored.

If you are interested in receiving Genscape's Quarterly Report bundle, please contact genscapesales@genscape.com. 

Genscape's Power Real-Time (RT) Europe service provides trading desks and analytical departments with unique capabilities to develop and improve trading strategies, analyze production, model fuel stacks and optimize asset utilization. It is an essential tool for power traders and analysts, delivering unparalleled fundamental data and real-time status of generation across the European continent. Click here to learn more and request a free trial of Power RT. 

Genscape's EPSI Platform combines constantly updated and high quality market data with flexible, insightful scenario analysis capabilities. The EPSI Platform's powerful, yet easy-to-use scenario analysis capability offers the flexibility to explore power market views and assess the impact of key market drivers such as demand forecasts and growth, wind and solar production, commodity price development, and new builds and retirements of plants. Click here to learn more about the EPSI Platform.

Genscape to Provide a Holistic View of the Petrochemicals Market with Commercial Offering of PX/PTA and Benzene-SM Product Assessment Reports from TPS

March 31, 2016, Louisville, KY – Genscape today announced a full integration of The Petrochemical Standard (TPS) into the company, effective immediately.

Based on demand and subscriber feedback, TPS will focus on a new commercial offering of the PX/PTA and Benzene-SM product assessment reports, which will become a part of Genscape’s collective suite of petrochemical supply chain intelligence services, providing a more complete view of the market as a whole. To begin this process, all free trials of TPS publications were terminated effective March 31, 2016.

“In an effort to be responsive to client feedback, we decided to consolidate our offerings and move ahead with product groupings,” said Chris Sternberg, managing director, oil, at Genscape. “This will allow us to provide a quality product for our customers in the areas where we see the most interest and need.”

To leverage the global pool of analysts and price reporters that could best meet the wants and needs of customers, the global price reporting group will fall under the purview of Genscape’s Houston office, realigning the editorial pool at the Singapore office so as to prevent the duplicate roles.

TPS is in the process of consolidating office locations in Singapore into one central location at Quadrant at Cecil under the DMGT umbrella, which will be effective by April 31, 2016.

About Genscape

Genscape is the leading global provider of real-time data and intelligence for commodity and energy markets, driven to improve market transparency and efficiency. With thousands of patented monitors strategically deployed worldwide, Genscape is unique in its ability to collect and report proprietary market fundamentals in real-time or near real-time. Genscape delivers innovative solutions across a number of asset classes including: Oil, Power, Natural Gas and LNG, Agriculture, Petrochemical and NGLs, Maritime, and Renewables. Genscape clients often gain important insights, improve risk management, or increase operational efficiency. For more information, please visit: www.genscape.com

For all press inquiries please contact:

Caitlin Mann
Marketing Manager
Office: +1 617 790 0963
cmann@genscape.com

Jensen Koo
Sales Manager, Asia
Mobile: + 65 8180 1730
jkoo@genscape.com

North American crude inventories will stay at historically high levels this year, though Genscape expects the first material draws to take place in May 2016, as strong demand takes hold for the summer. With production declines slowly materializing in the face of stronger pricing, coupled with significant outages at oil sands facilities reducing imports from Canada in the spring, stocks are expected to peak in April 2016, drawing down through the summer. Genscape’s balance forecast for 2016 through 2018 calls for:

• Material production declines in most of the major U.S. basins: Genscape expects North American production to fall by -581 Mb/d in 2016, and -317 Mb/d in 2017, as surging blended Canadian production is expected to grow at +84 Mb/d year-over-year in 2016. The biggest U.S. declines will occur in the Eagleford and Bakken, with resiliency in the Permian. Heavy upgrader turnarounds in Spring 2016 will impact near-term U.S. imports from Canada.
• Strong crude runs: Runs are stronger than previously expected. Margins have stabilized due to the transition to summer gasoline blends, after a dreadful first quarter marred by economic run cuts. RBOB prices have increased 40 percent since late February 2016. Utilization rates will exceed 88 percent for 2016 for North America, with crude oil demand peaking in 2016 at 19.1 MMb/d in late summer. April and May 2016 are pivotal months for planned work, possibly bringing utilization rates down two to four percent from March 2016, before expected high throughputs this summer.
• World imports into the U.S. will grow in 2016: With domestic production declining, Genscape’s view is that world imports buck the trend from previous year-over-year declines. We have total world imports into the U.S. at +518 Mb/d year-over-year for 2016, with light imports at +77 Mb/d year-over-year, intermediate imports at +693 Mb/d year-over-year, heavy imports at -246 Mb/d year-over-year. This is definitely an area of downside risk, where imports could under-whelm after a strong start to 2016 and pull even more barrels out of domestic storage.
• Insignificant growth in world exports: With the Brent-WTI forward spread in the $+-1.00 range, there is no support for material growth in exports from North America. Nonetheless, there could be some upside risk here if this spread was to widen significantly in the coming months.
• Inventories decreasing through 2016, with pressure towards continuing builds as runs slow: Genscape expects the biggest draw in P3 with inventories at 271.2 MM bbls in Q2 and coming down by 5.3 MM bbls to 265.9 MM bbls in Q3. In P5, from Q2 levels, Genscape expects draws of 3.4 MM bbls, pulling stocks down to 54.3 MM bbls in Q3. For P2, inventories will average 160.7 MM bbls in Q2 and draw by 8.6 MM bbls to 152.1 MM bbls in Q3 before demand starts to slow through the fall.

Genscape's new North American Crude Oil Balance Forecast provides a fundamental view of the market to help inform price forecasts. See where North American inventories are going and request a free trial of the North American Crude Oil Balance Forecast now.

Public information on a private upgraders such as Shell’s Scotford upgrader in Alberta is hard to come by. Most analysts rely on the public government data that is often three to six months lagged and can only confirm big changes in production after the fact. Genscape’s infrared cameras can help bridge this gap, and have been an effective indicator in informing the Canadian Crude Oil Production Forecast, especially at Scotford. The Scotford Upgrader, which has a production capacity of ~255 Mb/d, largely produces a synthetic crude oil (SCO) grade from mined bitumen.

Below is a chart from the Canadian Crude Oil Production Forecast detailing Genscape's upgrader-level forecast for Scotford against Genscape’s unit-level intelligence data. For this comparison, Genscape analysts use a numerical proxy for traditional “ON”/”OFF” daily data to estimate a monthly average utilization rate. This is similar methodology that can be found in the new North American Crude Oil Balance Forecast for weekly refinery utilization as well.

Genscape's forecast is trending very closely to its implied utilization where the analysts have forecasted that Scotford production will dip to 165 Mb/d in April 2016 and 65 Mb/d in May 2016, similar to 2015 (which was a very large maintenance event). Currently the average utilization rate at Scotford is 51 percent in April. In the Canadian Crude Oil Production Forecast, maintenance at Suncor, Syncrude, Horizon, and Nexen upgraders is slated for spring/early summer of 2016. These events will have an immediate impact on Canadian exports to the U.S. (PADD 2), and start to show up in the EIA’s weekly imports data in the coming weeks as forecasted in Genscape's North American Crude Oil Balance Forecast.

The Canadian Crude Oil Production Forecast is the most detailed, comprehensive oil production forecast across the significant oil producing regions in Canada. To learn more or request a free trial, please click here.

Genscape's new North American Crude Oil Balance Forecast provides a three-year outlook at the supply and demand balances in the U.S. and Canada. To learn more or request a free trial, please click here.

Iran’s crude oil waterborne exports reached 53.4mn bbls, or 1.7mn bpd in March 2016, up 140,000 bpd from February 2016, as the country sends more crude to India following the removal of economic sanctions in January 2016.

Iran’s export target markets have shifted in 2016 from East Asian to Indian refiners as the country works to regain market share. Before sanctions were imposed against Iran, the country was the second largest crude supplier to India.

While India’s gross oil imports from the Middle East and West Africa did not significantly change in March 2016, it has imported more Iranian crude, displacing supplies from other countries. India’s oil imports from Iraq and Nigeria decreased since the beginning of 2016. At the same time, imports from Iran surged from 6.0mn bbls (190,000 bpd) in January 2016 to 17mn bbls (540,000 bpd) in March 2016.

The increased crude exported to India from Iran in March 2016 appeared to mainly move to Vadinar terminal, where the 285,000 bpd Essar refinery is located, as well as some other East Coast destinations. As shown in the figure below, Iraq’s and Nigeria’s crude flows to Vadinar broadly declined since January 2016, while flows from Iran reached a post-sanctions record high of 9.0mn bbls in March 2016.

India’s oil imports from Iran are expected to increase further after a deal between multiple Indian refiners and Iran’s National Iranian Oil Company (NIOC), where the refiners agreed to import to at least 400,000 bpd from April 2016 onward, according to Reuters.

​Genscape monitors Middle East and West African Crude exports daily using its Genscape Vesseltracker data together with market intelligence sources to identify the loadport of each departing crude tanker and track it through to its final destination. The weekly Middle East Waterborne Crude Report and West African Waterborne Crude Report published on Mondays and Wednesdays includes complete details on every departing shipment and will continue to track the dynamics on oil flows as it happens to help market participants assess the impact of any changes in flow on regional markets.

Genscape and Vesseltracker have combined their extensive proprietary energy monitoring networks to launch the world’s most comprehensive and accurate picture of global shipping. To learn more about Genscape Vesseltracker, or request a free trial, please click here.

Using Genscape Vesseltracker data, the Middle East Waterborne Crude Report and West African Waterborne Crude Report illuminates the flows coming out of the Middle East producing countries so that traders and analysts can better gauge markets in Asia, Europe, and the Americas. It provides traders and analysts with insight and analysis to better forecast short-term price shifts by enabling them to anticipate the arrival of crudes from the Middle East. This weekly report offers new transparency and helps market participants inform market positions, improve decision making, and gain insight on key market drivers. To learn more about the Middle East Waterborne Crude Report and West African Crude Report, or to request a free trial, please click here.

The recent eight-day outage on TransCanada’s cross-border Keystone pipeline potentially removed 4.6mn bbls of oil from entering the United States from Canada and was a widespread influence on crude stock levels in both countries, according to Genscape.

The 590,000 bpd pipeline resumed flow on April 10, 2016, after being shut due to a leak near the Freeman pumping station in South Dakota. The Keystone pipeline system flows from Hardisty, AB, to Steele City, NE. From there, crude flows to either Patoka, IL, or to Cushing, OK, where stocks declined greatly last week.

​Genscape monitors detected the pipeline restart at about 12:30 p.m. (EST) April 10, 2016, issuing an alert to customers at 3:00 p.m. (EST) April 10. The pipeline restarted a day later than was expected. TransCanada issued a statement on April 8, 2016, indicating that the company was granted conditional approval by the U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration to resume delivering crude on the Keystone Pipeline system on April 9, following completion of repairs.

The pipeline was expected to restart at reduced pressure, according to TransCanada.

Cushing stocks draw down

Crude inventories at Cushing fell 1.5mn bbls for the week ending April 8, 2016, after flow on the Keystone pipeline to the hub decreased 291,000 bpd to 26,000 bpd. The stock decline marked the largest draw at the storage hub since September 11, 2015, when inventories had a week-over-week decline of 1.8mn bbls.

Despite the large draw last week, inventories on April 8, 2016 were just 2.3mn bbls from the record high of 69.65mn bbls set March 15, 2016. Capacity utilization of operational storage at Cushing was 77 percent on April 8, 2016. This is two percent below the all-time high set on March 11, 2016. Assuming an operational max of 80 percent utilization for Cushing, there is an estimated 2.6mn bbls of available storage space.

West Texas pipe flow jumps to Cushing

Meanwhile, flow on the Wichita Falls, TX,-to-Cushing 450,000 bpd segment of Plains All American’s Basin pipeline increased, supplementing lower flows to Cushing from Canada. Weekly average Basin pipeline flow increased 108,000 bpd to 352,000 bpd for week ending April 8, 2016.

In addition, West Texas storage inventories dropped 686,000 bbls for week ending April 8, 2016 as pipeline flow from West Texas to Cushing increased. Stock levels at Midland, TX, and Wichita Falls fell 1.28mn bbls collectively, coinciding with higher outbound Basin pipeline flows.

The Keystone outage was not expected to affect volumes on TransCanada’s 700,000 bpd Gulf Coast pipeline, which uses the facilities of the southern leg of the Keystone system from Cushing to the U.S. Gulf Coast, according to TransCanada on April 4, 2016. Weekly average flows on TransCanada’s 700,000 bpd Gulf Coast pipeline decreased 7,000 bpd to 341,000 bpd for week ending April 8, 2016.

Inventories fall at Patoka

The Keystone outage also led to stock declines at the storage hub in Patoka, IL, which has a capacity of nearly 19mn bbls. Storage inventories in Patoka decreased 564,000 bbls to 9.3mn bbls the week ending April 8, 2016. Keystone flows into Patoka for week ending April 8, 2016 were lower by about 233,000 bpd, offsetting increased deliveries into Patoka on the Marathon-operated 1.2mn bpd Capline Pipeline.

Flows on Capline, which delivers crude from St. James, LA, increased 77,000 bpd to 232,000 bpd for week ending April 8, 2016. In March 2016, Capline flows to Patoka averaged 147,000 bpd while Keystone flows to Patoka averaged 262,000 bpd.

West of Patoka, utilization at Phillips 66’ 305,000 bpd Wood River, IL, refinery was reduced due to the Keystone pipeline outage, according to Reuters. Genscape detected the shutdown of the 64,000 bpd crude section and 16,000 bpd coker on April 4, 2016. The units began restarting April 12, 2016, according to Genscape.

Barrels back up in Canada

As the Keystone outage decreased outgoing pipeline takeaway, barrels backed up in Western Canada. Stocks there climbed 1.5mn bbls to more than 28mn bbls last week, reaching the highest level recorded since Genscape coverage began in 2010. Stocks are expected to fall in coming weeks after the return of Keystone pipeline flow slackens bottlenecks formed in the region.

The stock increase was driven by a 1.8mn bbl build in Hardisty, AB. Inventories at the hub reached a record high last week of more than 13mn bbls. The largest inventory builds took place at the TransCanada and Gibson terminals, which feed Keystone.

Terminals at the Hardisty hub utilized less than 62 percent of capacity last week. A record-high utilization rate of 68 percent was set week ending December 31, 2010. More than 5.0mn bbls of additional storage capacity has come online at the Hardisty hub since then. Another 5.7mn bbls is under construction. Nearly 2.7mn bbls of the new capacity is being constructed by TransCanada.

Data from Genscape’s Cushing, Patoka, Canadian and Midland-Basin storage reports advised the storage trends in this blog. Genscape’s storage data is collected using infrared cameras, aerial diagnostics and other proprietary measurement techniques. This approach translates into highly accurate, advance notice of the actual oil storage levels. Genscape's Mid-Continent Pipeline Service, which includes updates on pipeline flows every 30 minutes with the option to download historical data and set up custom alerting, also advised the pipeline information contained in this report. Additionally, Genscape's North American Refinery Intelligence Service, which includes the Phillips 66 Wood River refinery, gives subscribers a comprehensive view of refinery utilization by product class around the United States and Canada. To learn more or request a free trial of any of Genscape’s Oil Market Services, please click here.

In the week ending April 15, 2016, many data vendors reported Mexico’s Los Ramones Phase II came online, but Genscape disagrees with this assessment and doesn't expect that system to come into service until the end of May 2016 at the earliest. 

Los Ramones Phase II will be a 1.4 Bcf/d system that runs from the southern terminus of Los Ramones Phase I near Monterrey, Nuevo Leon southward to Guanajuato.  It will serve several industrial parks, smaller citygates, a power plant, and interconnects with the PEMEX system. The pipe will be supplied with gas from Los Ramones Phase I, which itself is fed by the NET Mexico pipeline out of southern Texas. The startup of Los Ramones Phase II is expected to generate an incremental increase in South Texas exports on the NET system.

However, the system is not yet operational. Genscape monitors flows across the border on the NET pipeline because that system is considered an intrastate and, thus, does not report timely flow information.  Our proprietary estimates do not show an increase in NET cross-border flows.

In addition, participants in the Los Ramones II project have confirmed it is not in service.  Two weeks ago Genscape alerted its clients that Mexico’s gas grid operator – CENEGAS – had publicly stated the system would not come into service until late May 2016 or early June 2016. Genscape received similar timelines from some of the project’s developers.  Last week, Genscape was able to speak to some of the project’s consumers who also confirmed it is not online. 

Gencape believes these recent reports that Los Ramones Phase II came online were erroneous because they relied only on interstate pipeline data. The most timely, reliable information on NET flows available beyond Genscape is from the EIA. However, EIA data is reported three months in arears. There are two interstate pipelines that deliver into NET. However, using those volumes as a proxy for total NET flows is not reliable because they are incomplete and do not correlate well with EIA. Interstate deliveries to NET represent only 30-35 percent of NET flows; the rest comes from a variety of Texas intrastate pipelines and processing plants. Disruptions from one system can be easily compensated from by another.  

In addition, the correlation of the interstate nominations to EIA-reported NET flows is weaker than Genscape’s monitored estimates, which yield an r-square of 0.98. Genscape’s estimates average just three percent difference from EIA when EIA reports three months later. 

While Genscape utilizes proprietary data to observe timely flows, it is not its sole source of information. Genscape confirms flow activity with infrared monitoring of compressor stations on NET and also utilizes market contacts. 

A similar instance of speculation LRII came online occurred last December 2015. Upon an increase in interstate nominations to NET, market reports began stating Los Ramones II had come online, but Genscape disagreed. In this instance, our proprietary data did show an increase in flows. However, our conversations with project stakeholders indicated the increased flows were not due to the startup of the pipeline. Rather, Genscape was informed the increase was gas for linepack and should soon decline. Genscape notified its clients of this and, two weeks later, observed the decline expected. This demonstrates the fact that Genscape does not rely solely on flow data. In addition to maintaining relationships with market participants, Genscape also use infrared data on key system sites to confirm our flow estimates. 

At this time, Genscape is still not expecting Los Ramones Phase II to come online until late May 2016 at the earliest. However, in addition to watching proprietary estimates, Genscape is maintaining frequent contact with project stakeholders for timely information.  Genscape reports this information to clients as soon as we receive it.  

Using a combination of proprietary and patented monitoring technologies, Genscape is successfully delivering flow data for the NET Mexico pipeline that is proven to reduce error for supply and demand models. Estimates on the NET Mexico pipeline are delivered with less than a five percent error rate, providing the industry’s only insight into the state of Mexican exports. Click here to learn more or request a free trial of Genscape's Daily Mexico Exports Monitor. 

The Saddlehorn-Grand Mesa joint interest crude pipeline is on track to open in September to bring up to 340,000 bpd of crude from Platteville, CO, to Cushing, OK, where stocks have hovered at close to capacity this year, according to Genscape. The pipeline project, which has Noble Energy and Anadarko as committed shippers, is forging ahead despite lower year-on-year Niobrara crude production and underutilized existing takeaway capacity from the Denver-Julesburg (D.J.) Basin.

The new pipeline will essentially run alongside SemGroup’s 215,000 bpd White Cliffs pipeline system, which has averaged approximately 70 percent utilization since its expansion in January. Production in the Niobrara, which is located in the D.J. Basin, has decreased from a May 2015 high of more than 500,000 bpd to just over 400,000 bpd in May 2016, according to the U.S. Energy Information Administration estimates.

Saddlehorn-Grand Mesa will have an initial capacity of 340,000 bpd, expandable to 450,000 bpd. Of that capacity, 190,000 bpd is owned by Saddlehorn Pipeline's partners (Magellan Midstream Partners, 40 percent; Plains All American Pipeline, 40 percent; and Anadarko Petroleum Corporation, 20 percent), and the remaining 150,000 bpd is allocated to Grand Mesa Pipeline, which is owned by NGL Energy Partners.

Construction from Platteville to Cushing advances ahead of Powder River Basin connection

During Genscape's flight of the pipeline right of way on April 8, work crews were observed at all six of the pump stations identified for the Platteville to Cushing segment of the pipeline, and all were in a similar stage of completion. While the majority of piping was installed along the right of way, a number of excavated segments were observed during the flight, with construction materials and earth moving equipment present. Significant portions of the pipeline were still exposed, and additional piping has yet to be installed, primarily in and around the pump stations.

While pump station connections were still being secured, initial testing on Saddlehorn-Grand Mesa has begun. Hydrotesting has been initiated along completed segments of the pipeline, and testing is expected to be underway at the Platteville terminal in Q2, according to Magellan. Once fully tested, Saddlehorn-Grand Mesa will require about 1.08mn bbls for line fill, according to Genscape.

An additional segment from Carr, CO, to Platteville, CO, will be constructed on a delayed timeline. That segment will facilitate additional crude volumes from the Powder River Basin in addition to Bakken volumes from KinderMorgan’s 99,000 bpd Double H pipeline and potentially Canadian volumes from Spectra Energy’s 282,000 bpd Express pipeline. Saddlehorn began securing easements for that right of way in January 2016, according to Weld County, CO, property records. That segment is expected to come online in late 2016 and is only accessible to Magellan, Plains and Anadarko.

Cushing pipeline imbalance to reach record high

​Saddlehorn-Grand Mesa will increase total pipeline capacity into Cushing to about 3.55mn bpd from 3.21mn bpd, compared to the 2.57mn bpd of existing takeaway from the hub, where stocks have climbed this year amid a global low-price environment and an oversupply of domestic crude.

This additional inbound capacity will increase the net pipeline balance to almost 1mn bpd, with incoming capacity outpacing outgoing. The impending pipeline imbalance would be the highest since at least 2012, which was prior to reversal and expansion of Enterprise’s Seaway pipeline system, according to Genscape.

Despite imbalance, pipeline capacity may remain underutilized

Despite an additional 340,000 bpd of capacity coming online, capacity utilization from the D.J. Basin may remain underutilized. To date, the Saddlehorn portion of the pipeline has just 40,000 bpd of committed shipments, although that number is expected to ramp up to 80,000 bpd, according to Magellan.

With White Cliffs pipeline averaging around 70 percent utilization since January, and with Tallgrass Energy’s 90,000 bpd Pony Express Northeast Colorado Lateral from the D.J. Basin having come online in April 2015, it is unclear just how much Saddlehorn-Grand Mesa’s capacity will be needed amid declining production.

Genscape's Mid-Continent Pipeline Service provides total visibility into what's driving the U.S. and Canadian crude oil markets, with insight into critical pipelines supplying storage hubs and refineries. To learn more or request a free trial, please click here. 

As with numerous other Northeastern projects, there has been much speculation behind the status of Dominion's New Market Project and whether the project would be complete in time for their November 2016 in-service date. Although there has not been an official release from Dominion or revised schedule announcing the delay, Genscape believes the prospect of meeting the anticipated in-service date is bleak.

The proposed project would allow Dominion to provide an additional 112 MDth/day of firm transportation service for the two project shippers. Specifically, Dominion will receive 82 MDth/day from Brooklyn Union at the existing Leidy Interconnect in Clinton County, PA and deliver to the Brookman Corners Interconnect in Montgomery County, NY. The remaining 30 MDth/day will be received on behalf of Niagara Mohawk at the same Leidy Interconnect but delivered to the West Schenectady Interconnect in Schenectady County, NY.

To accommodate the additional capacity, Dominion plans to install two new compressor stations in Chemung and Madison County, NY (Horseheads and Sheds Station, respectively), additional compression at their existing Brookman Corners Station, and modifications to the existing Borger Station and the West Schenectady M&R Station. In the original application filed in June 2014 under the docket CP14-497, Dominion requested FERC approval by April 2015, so they could begin construction the upcoming September and meet their November 2016 in-service date. The hopes that construction would begin on schedule in September were officially squandered when FERC notified Dominion that the Environmental Assessment report would not be issued until October 21, then FERC had until January 18, 2016 to make an official decision. However, it is now three months past the 90-day federal decision deadline and no verdict has been made.  

A possibility behind the holdup is the facility air permits from the New York Department of Environment Conservation (DEC) for the Horseheads and Sheds Compressor Stations. The permit applications for the new stations are complete, however, currently they are in the mandatory 30-day public review and comment period which ends on May 13, 2016. After the close of the public review, the DEC has until June 12, to review the application, comments received, and to determine if a public hearing must be held. Typically, the department itself does not require public hearings for minor projects, such as the New Market compressor stations. However, while in the review process, the community can request to hold public hearings and if the requests are deemed valid and substantial, the request will be granted by the DEC. If this occurs, the case from then on will be treated as a major project, regardless of its initial classification.

In the best case scenario, if the community does not request a hearing and the facilities remain minor projects, the DEC can issue a final decision to either issue or deny the permit as early as May 28, 2016. If hearings were requested but deemed inadequate and dismissed, the DEC will issue a final decision by June 12, 2016. In the worst case scenario, the DEC grants a hearing request and as a result facilities are re-classified as major projects. The DEC must notify all commenters by the same June 12 deadline, and hearings must be scheduled and commence by July 12. After the hearings, the DEC has until approximately September 12 to review the application, the hearing testimonials, and issue a final decision.

However, based on similar Northeastern projects and the numerous opposing commentators in the FERC docket, Genscape believes it is likely the project will receive a hearing, and thus Dominion will not receive a decision in June 2016. Even if FERC issues a certificate before the DEC finished their permitting process, construction on the project cannot begin until the project has received those permits, which at the latest would be mid-September 2016. If Dominion is able to get construction up and running by late September/early October and follows a 14-month construction schedule similar to that which was illustrated in the initial application, Genscape anticipates the project coming online November 2017. However, if the project experience further issues and construction delays, as other northeastern projects have, Genscape expects the in-service date to be further postponed, possibly into early 2018. 

Genscape's Natural Gas Infrastructure Intelligence service offers the most complete and detailed tracking of processing plant, pipeline, and gathering line projects in the United States. Data is delivered monthly based on a comprehensive review of company statements, investor presentations, earnings call transcripts, FERC filings, and more. Expert analysts collect and interpret the information to deliver a streamlined approach for understanding and quantifying the influence of planned projects on the market. Click here to learn more or request a call about the Natural Gas Infrastructure Intelligence service. 

Average weekly crude loadings at North Dakota rail terminals fell to about 215,000 bpd last week, the lowest level since crude-by-rail volumes ramped up in the state along with Bakken shale production several years ago, according to Genscape.

Rail volumes are poised to fall further, sources said.

Loadings were 511,107 bpd during the same week last year and have declined since after the startup of additional takeaway crude pipelines from North Dakota and sustained unfavorable crude-by-rail economics, according to Genscape.

More recently, North Dakota road closures due to heavy rains have affected truck deliveries of crude to many rail terminals, a source said.

For the week ending April 22, 2016, average North Dakota crude-by-rail volumes declined for the fourth straight week, down 36,823 bpd from the week prior. There were fewer loadings at five of the 13 monitored terminals, while four of the terminals loaded no trains.

Going forward, the utilization of the North Dakota crude-by-rail capacity will depend on crude price arbitrage opportunities for refiners, according to Justin Kringstad, director of the North Dakota Pipeline Authority.

“I have had many discussions about the long-term future for rail in North Dakota. They all come back to market conditions and pipeline and water access to East and West coast markets,” he said. “If the [Benchmark Brent-WTI crude price] spread is low, pipeline space is available, and the barrel is not committed somewhere, it will likely take the pipeline option.”

If the spread widens, it is “tough to say” if Bakken crude shippers would chose rail over pipeline, he said.

The Brent-WTI spread, which is the leading indicator of moving crude on rail from North Dakota to coastal markets, has narrowed from close to $8/bbl during the week ending April 24, 2015 to about $2/bbl on Thursday.

In addition, lower North Dakota production has tapered rail volumes. Trade sources have said that the declining production is having an effect in the Bakken price market, as crude supplies on offer in the market dry up.

“I think June [trading] is going to get very tight, and I want some length to sell extra from what we produce,” one source said, noting that the company’s supply was dwindling.

The weight of low crude prices is expected to result in lower production in North Dakota, according to Genscape’s Spring Rock. The state’s crude output is expected to tumble to 915,000 bpd by May 2017. In February, production was 1.118mn bpd, according to the most recent North Dakota Minerals Resources Department data. That production was down from 1.179mn bpd in February 2015. Meanwhile, pipeline and local refinery capacity increased to 848,000 bpd during that that timeframe, including with the construction of Kinder Morgan’s 100,000 bpd Double H pipeline.

In addition to fewer barrels available to producers, additional pipeline takeaway capacity is also expected to take a bigger bite of crude-by-rail volumes. Energy Transfer Partners’ 450,000 bpd Dakota Access crude pipeline is slated to be online by end 2016.

“[Rail volumes] will be steady right up until [Dakota Access comes online],” a source said. “After that, I don’t see much of a need [for rail] – there might be a market, but not a need.”

The shift to sending North Dakota crude on pipelines instead of rail came as after global crude prices plummeted and the WTI-Brent spread narrowed. Many coastal refiners began to seek more foreign waterborne.

In February 2016, 51 percent of crude exported from North Dakota did so via pipeline, while 41 percent was shipped by rail, according to the latest data available from the North Dakota Pipeline Authority. In February 2015, 53 percent of crude moved by rail and 40 percent on pipeline. At its peak, 75 percent of North Dakota production moved by rail, in April 2013.

As crude production in North Dakota expanded rapidly, pipeline infrastructure initially struggled to keep up, leaving a window of opportunity for rail terminals to send barrels. When Bakken production crossed the 1.2mn bpd mark in September 2014, takeaway pipeline and local refinery capacity could consume only about 693,000 bpd of the output, according to Genscape.

Genscape's PetroRail Report provides proprietary insight into crude-by-rail movements with analysis of market implications. To learn more or request a free trial of the PetroRail Report, click here.

A ship blocking the Suez canal can cause a major disruption to trade. Ships transit the canal in a convoy system and a prolonged blocking of the canal can cause disruption to the convoy schedule.

On Thursday, April 28, 2016, the containership, MSC Fabiola, ran aground in the Suez Canal. Some of the vessels that should all be moving south through the canal can be seen through Genscape Vesseltracker queued up and stationary behind the MSC Fabiola.

Added time to ship voyages is a major expense for shippers, especially those on charter paying daily rates or incurring penalties if voyages over run. The Suez Canal Traffic Statistics site shows the normal volume of traffic through the canal.

The Suez Canal is the gateway to Europe for much trade, oil from the Middle East, and containerized shipments from Asia mainly all go through the canal. If the canal is blocked for a long period, then the alternative route between Europe and Asia involves going around the Cape of Good Hope, adding over 4,000 miles to the voyage to most European ports. At 15 Knots, that takes an extra 11 days for the journey between the Arabian Gulf and Europe.

As well as saving time, using the canal can save money. The largest single expense for a ship is it’s bunker costs. A large ship doing 15 knots may use 40+ tons of fuel a day and at current bunker rates of about $180 MT this amounts to $72,000 to cover the extra 4,000 miles. Now some of that extra cost would be discounted against canal fees, but it is evident that there are long delays and high costs involved in not using the canal.

The MSC Fabiola blocking southbound traffic can impact all ship operators trading between Europe and Asia in all but the very largest ships that can not transit the canal. Anyone from the cruise industry, oil, gas, and containerized trade are also affected.

Sign up now for alerts on the MSC Fabiola to receive updates through Genscape Vesseltracker. Genscape Vesseltracker currently runs one of the largest privately owned AIS receiver networks on the planet, combined with the largest AIS Satellite constellation currently available, over 144,000 vessels are tracked daily in near real-time. To learn more or request a free trial of Genscape Vesseltracker, please click here.

New assessment captures value of prolific Bakken crude production at the nexus of both pipeline and rail takeaway capacity

May 3, 2016, Houston, TX – Genscape launched a daily price assessment for Bakken crude located in the most evolved trading hub in North Dakota. The Beaver Lodge hub is situated between wellhead production and pipeline and rail transportation access from the Williston Basin, the producing basin for Bakken crude. Genscape’s Bakken Beaver Lodge assessment aims to transparently represent the value of the incremental Bakken barrel with this transportation optionality.

The Bakken spot market is comprised of two main modes of takeaway capacity: crude-by-rail and pipeline. Crude-by-rail emerged in 2009 as a way to send land-locked production to destination coastal markets. Since, pipeline capacity from the Bakken region has expanded substantially. North Dakota producers seek flexibility in sending barrels to market, using pipeline capacity as a first option and rail in times of arbitrage incentive.

While a Bakken crude spot market developed over the last five years at Clearbrook, MN, (junction between Enbridge’s North Dakota Pipeline system and the Enbridge mainline system), Clearbrook is removed from the producing basin, and has only pipeline connectivity. Genscape’s Bakken Beaver Lodge assessment is poised to represent the value of the spot barrel as close to the wellhead as possible, with flexibility for these multiple transportation options.

“A pricing benchmark has yet to take hold in the Williston Basin, despite the ample Bakken crude production levels coming from the region. Genscape’s new Bakken Beaver Lodge provides a reference price that is reflective of the incremental Bakken barrel’s value at the most evolved trading hub in the Williston Basin,” said Suzanne Evans, Director, Products and Pricing Assessments Development.

The Bakken Beaver Lodge assessment, which was assessed for the first time on Monday, will be published daily in Genscape’s PetroRail Daily Bakken Update publication, and weekly on Tuesdays in the PetroRail publication, alongside pertinent regional pipeline flow and crude loading data. Genscape provides insight into the entire North American crude oil landscape with data and market intelligence that follows the supply lifecycle from forecasted production to transportation on rail, pipeline, and ships, to its delivery at key refineries or storage facilities.

Genscape recently published a white paper, Beaver Lodge: A Bakken Crossroads, which explains how the hub offers takeaway optionality for the evolving North Dakota market. To read the full paper, please visit: www.genscape.com/beaver-lodge.

To view the full press release, visit: Genscape Launches Crude Oil Daily Price Assessment for Bakken Crude at Beaver Lodge, North Dakota

About Genscape

Genscape is the leading global provider of real-time data and intelligence for commodity and energy markets, driven to improve market transparency and efficiency. With thousands of patented monitors strategically deployed worldwide, Genscape is unique in its ability to collect and report proprietary market fundamentals in real-time or near real-time. Genscape delivers innovative solutions across a number of asset classes including: Oil, Power, Natural Gas and LNG, Agriculture, Petrochemical and NGLs, Maritime, and Renewables. Genscape clients often gain important insights, improve risk management, or increase operational efficiency. For more information, please visit: www.genscape.com

For all press inquiries please contact:

Amanda Lake
Marketing Specialist
Office: +1 617 790 0965
alake@genscape.com

A massive explosion occurred Friday on TETCO’s Penn-Jersey Line in the M3 zone. The explosion occurred on one of its 30” lines near Salem Township in Westmoreland County, PA, about 40 miles east of Pittsburgh. Flows beginning at the Delmont compressor (the western boundary of the M3 zone) have been cut to zero, and the flow impacts radiate eastward from Delmont.  Based on the timeline of similar large diameter pipeline explosions in the past, Genscape believes repairs are likely to take between 5-15 days, but clearly it could take longer.  

The initial impact on flows is significant (see Genscape's Natural Gas Real-Time (RT) TETCO flow map below). On April 28, just prior to the explosion, flows through Delmont were around 1.3 BCF/D relative to 2.6 BCF of capacity (~50 percent utilization). Flows through Delmont were shut off immediately after and averaged 1.07 Bcf/d in the five days prior (including a peak of 1.36 Bcf/d on gas day April 27). On Saturday, April 30 and Sunday, May 1, TETCO did report backward flows through Delmont of about 180 MMcf/d, though none for today. All compressors east of Delmont and west of Perulack registered similar declines. 

On Monday, May 2, TETCO M3 Deliveries cash basis closed near a three-week high at ($0.25), up from last Thursday’s ($0.62), while TETCO M3 Receipts dropped $0.02.  Algonquin Citygate picked up $0.21 from Thursday’s close to finish Monday at $0.64.

TETCO quickly posted notice April 29 that two production meters would have to be shut in. Those two points had been producing about 250 MMcf/d prior to the event.

TETCO has also been compensating by reducing its deliveries to interstate interconnects. The largest declines are in deliveries to Algonquin at Lambertville have been averaging 142 MMcf/d since the explosion, versus 373 MMcf/d in the five-days prior to the explosion; and deliveries to Dominion at Perulack, down to 31 MMcf/d versus 140 MMcf/d.

Flows east of Perulack – where TETCO’s Leidy Line connects to the Penn-Jersey northern line – are also down, though less so. TETCO increased volumes flowing southward on Leidy by increasing its storage withdraws from about 100 MMcf/d up to about 650 MMcf/d.

Deliveries to power plants so far appear relatively unaffected. There are six major power consumers captive to the system that collectively had been consuming roughly 550 MMcf/d. The largest is the PPL Martins Creek plant (177 MMcf/d), Genon/Reliant Hunterstown-Adams (~120 MMcf/d), and PPL JP Morgan plant (116 MMcf/d).

Farther east flows are less affected. Flows east of the merge point of the northern and southern lines are also unaffected. This appears to be a product of the aforementioned factors, combined within increased flows along the southern line. The southern line has more production tied into it. That is being used to increase flows through the Bedford compressor, where flows are up into the 200 MMcf/d range after running around 155 MMcf/d last week.

It is uncertain how long the system will be down and/or affected, but Genscape has reason to believe it will not be more than a week or two. First of all, there are parallel lines adjacent to the ruptured one that may be able to come back into service soon. Second: similar events on other pipelines in the US and Canada have taken just a few days to repair.

The section of TETCO where the explosion occurred features four lines running in parallel: a 36” line, two 30” lines, and a 24” line. While there has not been confirmation the other lines have been damaged, TETCO has shut them down as a precautionary measure. It is possible these lines may be brought back into service before repairs on the ruptured line are made. If that is the case, the remaining lines should have enough flow capacity to satisfy downstream obligations based on recent nomination levels. Similar events on other pipelines have been repaired rather quickly. In January, the REX pipeline ruptured; flows were restored within about 12 days. Last June, a 42” Energy Transfer line near Cuero, TX exploded was returned to operation in three days. In 2014, a rupture on Viking’s 24” mainline took 3 days to fix. And in 2011, a rupture on Bison’s 30” line took about 15 days to repair. A system-wide OFO for all deliveries into the system is in effect, and an OFO for all deliveries and receipts in the M2 zone is also in effect.

How long will the repairs take?

There have been a number of large diameter pipeline explosions over the years. The amount of time it takes to repair a large diameter pipeline ruptures are usually a matter of days (not weeks). Below are three examples of large diameter explosions that were repaired in 3, 11, and 15 days respectively, but clearly repairs can take longer. 1-2 weeks to repair the line(s) from the initial event is our best guess.

The Texas Railroad Commission (RRC) says the explosion of a 42″ natural gas pipeline near the town of Cuero, Texas in June 2015 was caused by a “material failure” on part of the pipeline. Energy Transfer operates the pipeline that exploded on June 14, 2015. The company is planning to build two pipelines of the same size in West Texas – the Trans-Pecos Pipeline and the Comanche Trail Pipeline. The RRC regulates the oil and gas industry and investigated the Cuero explosion shortly after it happened. A 46-page report on the explosion obtained by Marfa Public Radio says the pipeline ruptured because of an “excessive bending load” – essentially too much tension on part of the line – which led to a crack that started at the weld and moved from the bottom up. Nobody was hurt in the blast, but 16 people were evacuated. Witnesses reported seeing flames shooting about 100 feet up into the air.  The part of the line that exploded was shut off and isolated, but according to the RRC’s report, it was repaired and back in operation about three days after the explosion.

On January 29, near Bowling Green, Missouri, a rupture in a Rockies Express 42-inch natural gas pipeline blew a 20 by 20-foot crater and forced a six-hour evacuation of 50 families. The rupture occurred in a vacant field a few yards east of Pike County Road 43. Strong winds helped dissipate gas until a temporary cap was put in place. Update: Tallgrass Energy’s 1.8 Bcf/d Rockies Express Mainline Segment 300 Returns to Service in Missouri February 9; Force Majeure Remains in Place According to flow data on Tallgrass Energy’s informational postings website, natural gas flows on Segment 300 of the company’s Rockies Express (REX) Pipeline resumed at low levels February 9. On February 10 and 11, the segment returned to normal rates of approximately 1.3 Bcf/d. However, according a critical notice posted to the website, the Force Majeure on Segment 300 remains in place. Tallgrass Energy on January 29 reported that Segment 300 experienced an operational interruption due to the rupture near Bowling Green in Pike County, Missouri

On July 20, a six-month-old, 30-inch natural gas pipeline exploded near Gillette, Wyoming, creating a 60-foot (18 m) crater. There was no fire, nor any injuries. Construction or installation issues caused the failure.

Update May 5, 2016 12:40PM ET

While the return of all four lines may take longer than the 1-2 weeks Genscape initially estimated, it appears that at least partial capacity through Delmont is likely to be restored next week (per TETCO’s latest notice). PSHMA issued a corrective action order yesterday (summary below). Corrosion at a weld is the likely culprit, although a final determination has not been made. Corrosion has been the cause of many of the 77 explosions involving gas infrastructure (mostly pipelines) in the last 10 years. 

There is a chance that TETCO is required to operate at reduced pressure after the repairs are completed. If PHSMA requires a 20 percent reduction in pressure then capacity could be reduced by up to 20 percent and capacity through Delmont would be permanently reduced from 2.6 BCF/D to around ~2.1 BCF/D. Genscape does not know if a pressure reduction will be required.

Brief summary of PHMSA’s corrective action order:

The cause of the failure has not been fully determined, the preliminary investigation identified evidence of corrosion along two circumferential welds: one at the point of failure and another that was excavated. The pattern of corrosion suggests a possible flaw in the coating material applied to the girth weld joints following construction welding procedures at the time. TETCO must expose the ruptured line for at least two girth welds on either side of the ruptured site to examine for corrosion, coating condition or other damage. If damage is discovered then more pipe must be exposed until at least 10 feet  of undamaged pipe is exposed and examined. TETCO must repair or replace pipe or coating where necessary. The other lines must also be exposed at least to girth welds in both directions from the point of failure and undergo the same process as the ruptured line. Restarting procedures for each line will involve pressure increments of 25 percent, 50 percent, and 80 percent held for one hour. After reaching 80 percent, TETCO must receive written permission for each line before increasing to final normal operating pressure.

Along with Genscape's unparalleled analyst support and insight, Genscape's Natural Gas Real-Time (RT) service provides the most comprehensive view of public data. With up-to-the-minute informational postings for over 200 natural gas pipelines, 900+ pipeline updates per day, covering up to 48 cycles, and a myriad of other public data, analysts now have the comprehensive data they need to know everything. Click here to learn more or request a free trial of Genscape's Natural Gas RT service. 

Genscape’s Natural Gas Notices & Maintenance portal consolidates hundreds of maintenance and notice events from electronic bulletin boards (EBBs) to help natural gas traders streamline their daily processes and stay informed of unavoidable events impacting the market. Genscape collects notices from over 200 pipelines that are fed into the platform within minutes of their availability on the pipeline websites. In addition Genscape provides maintenance events for over 70 major interstate pipelines. Click here to learn more or request a free trial.

Houston gasoline rack demand finally recovered the week ending April 28, 2016 from the “Tax Day Flood” of April 18, 2016, where heavy rains and widespread flooding closed roads and damaged thousands of vehicles, according to Genscape Supply Side Analyst data.

On April 18, 2016, Houston and Pasadena, TX, rack loadings for regular, premium, and midgrade gasoline fell to just 84,000 bpd, 53 percent below the previous week, according to Genscape Supply Side Analyst data. The next day, gasoline rack activity initially rebounded to 179,000 bpd, up five percent from the prior Tuesday, as trucks looked to refill stations following the treacherous road conditions the previous day (see graph below).

However, gasoline rack activity in the Greater Houston Area remained depressed in the days to come, staying consistently below levels seen the week prior to the April 18, 2016 flood. On April 21, 2016, gasoline rack activity in Houston and Pasadena fell to 153,000 bpd, seven percent below the previous week.

On April 25, 2016, one week after the “Tax Day Flood,” gasoline rack activity reached 149,000 bpd. This was, of course, substantially higher than the lows of April 18, 2016 (77 percent week-on-week). However, this was still markedly below the previous two weeks in April 2016, where Houston/Pasadena gasoline rack movements hit 171,000 bpd on April 4 and 179,000 bpd on April 11, 2016.

Data for April 26-28, 2016 shows the continuous recovery in Houston/Pasadena gasoline demand from the decrease caused by the April 18 flood, with rack activity near or exceeding 169,000 bpd, the weekday average for the first two weeks of April prior to the flood.

Despite the apparent decline in gasoline demand due to the April 18, 2016 flood, rack gasoline prices in the Houston area steadily increased from April 18 through last Friday, according to volume weighted average rack prices as published in Genscape’s Supply Side Analyst. Regular gasoline prices increased nearly $0.20/gal from April 19 to April 28, 2016, with regular gasoline rack prices averaging $1.53/gal on April 28. The rise in price was likely due to an increase in the CME Group NYH RBOB futures basis price, the switch to lower 9.0 Reid Vapor Pressure (RVP) gasoline ahead of summer, and several refinery outages in Houston prior to the flooding.

On April 18, 2016 the 70,000 bpd fluid catalytic cracker was shut down at Shell’s 340,000 bpd Deer Park, TX, refinery, according to Genscape imagery of the refinery. Previously, Lyondell shut its 95,550 bpd vacuum distillation unit (VDU) on April 11, 2016, and the associated 130,000 bpd crude distillation unit on April 12, 2016 at its 280,390 bpd Houston refinery, and a second 95,550 bpd VDU on April 15, 2016, as observed by Genscape. These shutdowns were in response to a fire at Lyondell’s 42,000 bpd coker on April 8, 2016. One of the VDUs (that was shut on April 15, 2016) was restarted May 1, 2016, according to Genscape. The 130,000 bpd CDU and its associated VDU remain offlineas of May 2, 2016.

Genscape’s new Supply Side Monitor and Supply Side Analyst products provide a view into refined products demand activity and pricing with an unmatched level of timeliness. Both products include actual rack transaction data from 400 rack city locations across all 50 states. The products covered include: Regular gasoline, Midgrade gasoline, Premium gasoline, Jet Fuel, Kerosene, and Diesel. For more information or a free trial, click here.

On April 27, 2016, Genscape Vesseltracker detected a shipment of 4,200 tons (about 1.3 million gallons) of biodiesel from Australia arriving at the Texas Terminals Wharf in the Houston area. The Stolt Sun vessel carried the product that originated from the ports of Adelaide and Fremantle in Australia.

According to data from the EIA, the U.S. hasn’t seen imports of biodiesel from Australia since January 2013, and the shipments from Australia have only occasionally occurred in the EIA’s recorded history (February 2012 and May 2011). 

What is interesting about Australian biodiesel imports?

According to the 2015 USDA FAS GAIN report, Australia only produced about 17 million gallons of biodiesel in 2014. When the report was issued in August 2015, the expectation was that there would be 26 million gallons produced in 2015. The USDA also reported that only four of the eight biodiesel plants in Australia were operating at that time.

U.S. imports would suggest little Australian demand for biodiesel and favorable economics stateside with the current regulatory incentives, even with the nearly two-month journey.

What are the potential implications?

The Blender’s Tax Credit, increased Renewable Fuel Standard volumes, and the value of Low Carbon Fuel Standard credits are driving increased U.S. consumption of biodiesel in 2016. A big question for the industry is how much of that will come from non-U.S. versus U.S. sources. Seeing another source of imports that wasn’t in the market in 2014 and 2015 could be an indication of the strength of imports in fulfilling increased demand.

Using Genscape Vesseltracker AIS data and proprietary ship tracking, the Global Biodiesel Monitor provides stakeholders with access to key international shipment information to deliver a more complete picture of biodiesel and renewable diesel flows worldwide. To be in the know about U.S. imports of biodiesel and renewable diesel in this pivotal year for advanced biofuels, contact Genscape for a free trial to the Global Biodiesel Imports Monitor. With your trial subscription, you will discover the consignee that received the Australian shipments and all other biodiesel and renewable diesel imports. Click here to learn more or request your free trial now.

Genscape’s proprietary network of infrared cameras provide clients with unique images of construction progress on expansions and capital improvements in addition to real-time alerts on the ethylene crackers and fractionators.

Recently, Genscape announced activity of Train 5 at Targa’s Cedar Bayou Fractionation complex, which adds 100,000 barrels per day of new fractionation capacity in Mont Belvieu, TX. Initial startup activity was monitored on March 24, 2016. On April 29, 2016 Targa confirmed Train 5 is in startup mode, with full operations expected by the end of the second quarter.

Genscape’s IR cameras on May 3, 2016 showed progress on CP Chem’s 3.3 billion pound per year ethylene cracker at Cedar Bayou, expected up in mid-2017. Genscape’s monitors showed seven stacks erected of the eight planned cracking furnaces. Clients can also see Enterprise Products Partners’ 1.65 billion pound per year Propylene Dehydrogenation Unit (PDH) under construction at the Mont Belvieu complex. This facility is expected to start up in Q2 2017 and will produce propylene from about 35,000 bpd of propane. Genscape plans to expand monitoring coverage to include the new worldscale ethylene crackers under construction at Dow’s Freeport, TX, plant and Exxon’s Baytown, TX, plant. These units will produce a combined 6.6 billion pounds of ethylene per year with expected completion in the second half of 2017.

Last year, Genscape cameras recorded construction progress at Phillips 66’s 100,000 bpd Fractionator One at Sweeny, TX. The fractionator, seen from the cameras monitoring the ChevronPhillips Sweeny 22 ethylene cracker, began initial startup operations on September 26, 2015. According to Phillips 66’s Q2 2015 earnings call, startup was 90 percent complete in August 2015 with expected startup in the fall. However, over the weekend of October 2, 2015 Genscape analysts saw the furnace tower being dismantled. About 10 days later, a spokesman from Phillips 66 confirmed the start would be delayed until the end of Q4 2015. Genscape reported construction of the new furnace beginning December 2, 2015 and the startup was announced six days later by the company.

Genscape's suite of patented in-the-field energy monitors deliver increased transparency into the U.S. Petrochemicals & NGLs markets. To learn more about Genscape's Petrochemical & NGLs Services, please click here.

Singapore's Jurong Aromatics Corporation (JAC) was struck by a fire on Wednesday, April 20, 2016, according to eyewitness accounts, and an employee was hospitalized following the blaze, according to an official source.

A fire broke out at an oil tank in Singapore's Jurong Island at 1500 hrs SGT, on a facility at Tembusu Road, according to the Singapore Civil Defence Force. A video sent by an eyewitness to Genscape showed that a storage tank in a Jurong Aromatics Corporation (JAC) facility was ablaze.

SCDF said that an oil tank fire at 23 Tembusu Road in Singapore was extinguished at 7:45 PM, involving light crude oil that is non-toxic in nature. Firefighters stopped short of mentioning the name of the facility and the company involved.

The location of the blaze is the address of Singapore's JAC; Genscape confirmed and reported late-Wednesday afternoon that a blaze had struck the JAC facility based on an exclusive eye-witness video footage, showing a blazing tank next to another tank clearly labeled "JAC".

Traders in China surveyed told Genscape that the light crude oil in question was likely to be naphtha. JAC's plant is designed to use either condensate or naphtha as a feedstock, but had reconfigured to using naphtha some time ago, based on Genscape data.

"It has been a prolonged five-hour operation involving approximately 150 SCDF personnel battling the raging inferno. SCDF surrounded and contained the fire with a large 6,000 GPM foam monitor and several ground monitors. This operation was a race against time in view of the tank that has buckled, and on the need to prevent the intense fire from spreading to its immediate surroundings," SCDF added.

SCDF explained that the fire broke out at an oil tank in Singapore's Jurong Island at 1,500 hrs SGT.

"A total of five fire engines, three red rhinos, one ambulance, and 29 support vehicles, comprising approximately 150 SCDF personnel were involved in the firefighting operation," said the SCDF.

JAC is able to process 100,000 b/day of condensate. It has a nominal capacity of 800,000 mt/year of paraxylene (PX), 438,000 mt/year of benzene and 200,000 mt/year of orthoxylene (OX). It can also produce 2.5 million mt/year of high-value oil products such as jet fuel, ultra-low sulfur diesel, naphtha, LPG and fuel oil, which are all meant for export, but it has been offline since December 2014, mainly due to unfavorable economics including a plunge in oil prices, and overcapacity issues for aromatics in the region.

The cause of the blaze as well as the damage have not been determined. This fire is unlikely to affect JAC's production, as its plant has been idled for over a year.

"This fire isn't likely to have a big impact (on the market)," according to a source from China's Shaoxing Yuandong polyester.

Using patented in-the-field energy monitors, Genscape delivers increased transparency into the petrochemicals and NGLs markets. Click here to learn more or request a trial of Genscape's Petrochemical and NGLs Services.

Cushing, OK, crude inventories reached a record high May 3, 2016 of more than 70mn bbls after refinery outages in the U.S. Midcontinent displaced barrels to both storage tanks and the U.S. Gulf Coast. Without significant new storage capacity, Midcontinent stocks could reach maximum operating capacity this year, according to Genscape.

Cushing inventories increased 1.3mn bbls week-on-week following the spring maintenance season, which also caused Patoka, IL, stocks to climb 1.4mn bbls to a record high above 11mn bbls week ending April 29, 2016.

Meanwhile, along the Gulf Coast, waterborne loadings to international and domestic destinations recently hit a 2016 high while stocks increased in the Midcontinent.

Cushing stocks border maximum capacity utilization

Inventories at Cushing are close to maximum operating capacity, and on May 3, 2016 reached utilization just shy of 80 percent, a record high since Genscape began monitoring the hub in 2009. Genscape has never observed capacity utilization higher than 80 percent based on historical data, though utilization may breach 80 percent depending on the utilization of merchant capacity, or capacity that is leased by an owner to other users.

Utilization of operational capacity has remained above 70 percent at Cushing since November 2015. Storage capacity at six of 16 operators at Cushing was utilized above 80 percent as of May 3, 2016.

There is little help on the horizon from new storage capacity to prevent Cushing from hitting maximum operating capacity. There are two tanks under construction at Cushing, totaling 540,000 bbls. No tank construction projects are underway at Patoka.

The record high May 3, 2016 was almost 600,000 bbls higher than the previous record high set March 15, 2016 and 5.0mn bbls more than the highest point reached in 2015.

Storage data reflecting Cushing and Patoka inventories for week ending May 5, 2016 was released to customers on May 9. The May 3, 2016 Cushing record high was the fifteenth this year, as stocks continue to grow.

Patoka stocks also reached a record high after increasing two consecutive weeks, up 2.2mn bbls between April 15 and April 29, 2016. The record high was 488,000 bbls higher than the previous record high of 10.6mn bbls reached November 13, 2015.

Capacity utilization at Patoka terminals was at 65 percent for the week of April 29, 2016, just below the record high utilization rate of 67 percent set April 2013. Capacity utilization at Patoka has fallen below 50 percent once in 2016.

In 2016, crude storage in Texas increased as storage capacity in the Midcontinent became scarce. Total monitored crude stocks in the Gulf Coast and West Texas region increased 18.5mn bbls between February 12 and March 18, 2016 to a record high above 122mn bbls. Stocks in the region remained just below the record high for the next month before dropping 2.4mn bbls the week ending April 29, 2016, coinciding with higher waterborne loadings out of the Gulf Coast.

Record-high exports ship from USGC

More than 4.5mn bbls of waterborne shipments left the Gulf Coast for foreign destinations the week ending April 29, 2016, the most since Genscape began monitoring in August 2014. On a weekly basis, crude exports from the Gulf Coast averaged about 888,000 bbls higher in March and April compared to January and February 2016.

Total U.S. Gulf Coast waterborne loadings reached a 2016 high of 7.5mn bbls week ending April 29, 2016, and have also increased since March 2016. Weekly loadings in March and April averaged 1.3mn bbls higher than in January and February 2016.

During the week ending April 29, 2016, two export shipments left from St. James: one to Brazil and one to the Canadian East Coast, totaling 1.4mn bbls. In addition, more than 1.0mn bbls moved from Beaumont-Nederland, TX, to Caribbean locations. Total shipments from there increased to 1.9mn bbls. In Corpus Christi, TX, an export loaded from the Valero West refinery dock, expected to bring about 441,000 bbls to Pembroke, U.K. Total domestic loadings from Corpus Christi fell 501,000 bbls.

Total loadings also decreased from Houston, falling 630,000 bbls to 1.17mn bbls, which offset a 654,000-bbl increase from the previous week. A 550,000-bbl loading left Enterprise’s Houston Terminal for Bullen Bay, Curacao, on April 28, 2016, and 500,000 bbls loaded the next day from HFOTCO for Gibralter, U.K.

Midcontinent refinery utilization dips during seasonal maintenance

Refineries typically use the spring months to perform necessary repairs and maintenance on infrastructure before gearing back up for summer driving season. Units at several major refineries in the Midcontinent shut beginning in late February 2016. Primary processing utilization rates decreased 15 percent from the end of February to a 2016 low of 82 percent reached April 8, 2016.

The Midcontinent refinery maintenance season is coming to a close as several units return to service. Primary processing utilization rates were back to 93 percent week ending April 29, 2016. Record-high storage levels could decline if run rates continue to increase.

A 204,000 bpd crude distillation unit was brought back online at Marathon’s 206,000 bpd Robinson, IL, refinery April 28, 2016, after being offline since March 2, 2016. Activity at all monitored units at Husky’s 155,000 bpd Lima refinery has increased since April 27, 2016, after being shut since mid-March for a planned turnaround.

Although maintenance is being completed at several refineries, further outages are expected elsewhere. BP and Husky’s 160,000 bpd Toledo, OH, refinery recently started shutting units in preparation for 11 weeks of planned maintenance. The turnaround will reduce operating capacity at the facility by 75 percent.

Genscape's Oil Market Services provide advanced notice of changes in oil market fundamentals using a combination of infrared diagnostics, electromagnetic frequency monitors, high resolution aerial photography, and near-earth satellite imagery. To learn more or request a trial of one of Genscape's Oil Market Services, please click here.

In addition to nearly 340,000 bpd of planned maintenance scheduled in May, Western Canadian oil output is expected to be cut by an additional 260,000 bpd after bitumen and synthetic crude production was shut due to a massive wildfire in northern Alberta, according to Genscape. The fire, that began May 4, 2016, continues to burn near Fort McMurray, leaving in its path crude production cuts, falling stocks, lower pipeline and rail loading volumes and a stronger Western Canadian Select crude price.

“For May 2016, we expect reduced bitumen volumes of 80,000 bpd and reduced synthetic crude oil volumes by 185,000 bpd due to wildfires,” Genscape Senior Crude Oil Analyst, Carl Evans said. Evans noted that the reduced volumes were in addition to volumes already cut due to planned turnarounds during May.

“We have already seen some of the operators come out and say they are restarting facilities such as the Shell Albian and Syncrude Aurora mines with nearly no damage to on-site facilities,” Evans said May 11, 2016. “It’s looking like things will be ramping back up in the coming week with the fires not significantly bringing down production on the year.”

Wildfire production cuts compound turnarounds

The current wildfire is expected to have a larger impact than a similar fire event during May 2015 in Alberta, when an average of 180,000 bpd of production was cut.

For the most recent forecast, Genscape assumed that an average of 800,000 bpd of production capacity would be taken offline over 10 days during May 2016 due to the fire. This capacity includes Steam Assisted Gravity Drainage (SAGD) facilities and upgraders.

Some production capacity was already expected to be offline this month during planned turnarounds. Genscape estimated an average of 340,000 bpd of May 2016 regional crude production to be shut during the maintenance. Combined with the 260,000 bpd output loss from the wildfire, a total of about 600,000 bpd of Western Canadian production could be cut this month, according to Genscape.

The wildfire, however, did not affect the 2016 long-term production view published in Genscape's most recent Canadian Crude Oil Production Forecast. Synthetic crude production in 2016 is expected to match 2015 at about 975,000 bpd, and 2016 bitumen production is expected to be about 1.6mn bpd a about 200,000 bpd more than 2015.

WCS diffs jump as production declines

Spot differentials for Western Canadian Select rose to an $11.35/bbl discount to the West Texas Intermediate Calendar Month Average (WTI CMA) May 9, 2016, up $2.05/bbl from the previous week and the narrowest differential to WTI CMA assessed by Genscape since July 2015. However, WCS was heard to trade at WTI CMA minus $12.65/bbl on May 11, 2016.

The current spot market for WCS is trading barrels for June 2016 injection into pipelines, indicating an expectation that the Fort McMurray wildfire will affect production and crude availability over the next few weeks. However, spot market sources noted that fire may not have a lasting effect due to ample inventories.

“I think there will be a slowdown (in production), but temporary, and I don't think there has been any oilfield damage,” Canadian crude market source said.

In May 2015, WCS differentials narrowed to WTI CMA minus $7.60/bbl on the back of fire-related production cuts. At that time WCS was $4/bbl stronger than in April 2015, according to Genscape.

Western Canadian Crude stocks sink

In Canada, crude storage stocks declined due to production cuts. Crude inventories at the four locations Genscape monitors in Western Canada (Alberta Heartland, Edmonton, AB, Hardisty, AB, and Kerrobert, SK,) fell almost 1.0mn bbls to 25.6mn bbls for week ending May 6, 2016. Stocks declined four percent from the previous week and almost 10 percent from the record high of 28.3mn bbls week ending April 8, 2016. The largest decline was at Edmonton, where weekly stocks fell almost 900,000 bbls, or eight percent, to 9.4mn bbls, according to Genscape.

Around this time last year, stocks at those four locations were about 5.0mn bbls less than the volume monitored by Genscape on May 6, 2016. Over the past year, new capacity has come online to bring the amount of operational capacity monitored to just above 48mn bbls for the region. As of May 6, 2016, 53 percent of total operational capacity was utilized at the locations, compared to 46 percent a year ago.

Inventories at Western Canadian storage hubs are well situated to cover short-term production losses, according to Genscape storage analysts. Downstream crude markets are even better positioned to deal with any potential disruption, as stocks at storage hubs in both Patoka, IL, and Cushing, OK, are historically high.

Cross-border crude pipe volumes decline

Pipeline flows from Canada to the U.S. Midcontinent began to fall last week as the wildfire hindered production.

For the week ending May 6, 2016, flow from Hardisty on TransCanada’s 590,000 bpd Keystone pipeline into Steele City, NE, declined 107,000 bpd to 366,000 bpd, according to Genscape. The curtailment could increase in the coming weeks, which would affect imports of Canadian heavy crudes into the United States and also narrow the price differential between light and heavy grades, market sources said.

Keystone crude flows from Steele City-to-Cushing decreased 28,000 bpd to 207,000 bpd last week, while volumes from Steele City-to-Patoka were 79,000 bpd below the previous week. Volumes moved to Patoka were 52 percent below the year-ago week, while volumes moved to Cushing were five percent less than the same week last year.

In addition, crude flows on the 1.2mn bpd Marathon-operated Capline pipeline into the Midcontinent from Louisiana are expected to increase to as much as 600,000 bpd in the coming weeks to offset lower volumes from Canada, according to industry sources. As of May 10, 2016, total weekly Capline flows from St. James, LA, increased 17 percent to 351,000 bpd. The portion of flow to Patoka, IL, increased by 38 percent to 179,000 bpd. The remaining flow, which increased one percent to 173,000 bpd, was delivered into Collierville, TN, where crude storage for Valero’s 195,000 bpd Memphis, TN, refinery is located, according to Genscape.

Canadian crude-by-rail loadings fall at Edmonton

There have been no rail loadings at the Kinder Morgan-Imperial Edmonton Terminal since May 4, 2016, when 49,500 bpd loaded. This marked the longest stretch since July 2015 with no loadings. As of May 10, 2016, an average of 9,900 bpd has loaded in May, 74 percent below 37,400 bpd loaded in April 2016.

At the terminal in 2015, an average of 7,000 bpd loaded between May 24 and June 20 due to fire-related lower production, and no rail cars were loaded during the week ending June 6.

Genscape's Canadian Crude Oil Production Forecast uses a highly detailed, bottom-up approach that examines the most significant oil producing areas in Canada providing a detailed production forecast and analysis. To learn more about the Canadian Crude Oil Production Forecast, please click here.

Additionally, Genscape's Canada Crude Oil Storage Report provides weekly snapshot estimates of physical crude oil inventories at Edmonton, Hardisty, Kerrobert, and Alberta Heartland. To request a free trial of the report, please click here.