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Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Jeffrey A Shankman X-To: Jennifer Burns X-cc: X-bcc: X-Folder: \Jeffrey_Shankman_Jun2001\Notes Folders\All documents X-Origin: Shankman-J X-FileName: jshankm.nsf please print ---------------------- Forwarded by Jeffrey A Shankman/HOU/ECT on 12/18/2000 08:04 AM --------------------------- From: Doug Leach 12/18/2000 07:19 AM To: Ross Koller/LON/ECT@ECT, Chris Mahoney/LON/ECT@ECT, David J Botchlett/HOU/ECT@ECT, John L Nowlan/HOU/ECT@ECT cc: Jeffrey A Shankman/HOU/ECT@ECT Subject: Refined Products Line--European Markets - CERA Alert: December 15 , 2000 ---------------------- Forwarded by Doug Leach/HOU/ECT on 12/18/2000 07:18 AM --------------------------- "Webmaster@cera.com" <webmaster on 12/15/2000 10:20:28 AM To: cc: Subject: Refined Products Line--European Markets - CERA Alert: December 15 , 2000 CERA Alert: December 15, 2000 Title: Refined Products Line--European Markets CERA Knowledge Areas: Refined Products Rotterdam Differentials * The fall in product prices that started in late October-after a brief surge during heightened market tensions over Middle East unrest-continued in November. Average differentials for all products over crude fell, with those for gasoline falling particularly strongly in line with very weak reported demand. FOB ARA barges for premium unleaded gasoline over Dated Brent averaged $1.51 per barrel, compared with $5.86 per barrel in October. * Jet/kerosene barge premiums over Dated Brent slipped by over $2.00 per barrel in November from October's average, but because of current market sentiment favoring prompt production of heating oil, they remained high at an average of $10.98 per barrel. Jet values had enjoyed the largest increase of all products during October's Middle East-related price increases; consequently jet/kerosene's premium over heating oil narrowed in November following an easing of tensions, averaging the month at $2.53 per barrel, compared with $3.29 per barrel over heating oil in October. * Despite falling by $1.33 per barrel from October's level, average 0.2% sulfur gasoil barge values remained very strong in November, averaging $8.45 per barrel over Dated Brent. High end-user prices for heating oil remain a strong deterrent to demand, however; provisional data for German heating oil demand in November show a fall of over 10 percent from November 1999 levels (to an average of 608,000 barrels per day [bd]). * Discounts of low sulfur (1.0%) heavy fuel oil to Dated Brent widened again in November, averaging $6.74 per barrel. As was discussed last month, much of the reason for their improvement in October was because of concerns over the availability in Russian exports: toward the end of October and into November, however, such concerns subsided, leading to a widening of discounts. High sulfur (3.5%) fuel oil discounts widened by $3.26 per barrel to an average of $9.61 per barrel to Dated Brent. Refinery Margins * Margins fell back considerably after the very high levels recorded in October, but still remained quite strong and reflect the current market sentiment of favoring maximum refinery production, especially of middle distillates. High jet/kerosene and gasoil/heating oil values kept margins buoyant, but falling gasoline premiums and widening heavy fuel oil discounts were the major downward influences. * Using CERA's illustrative yield patterns, gross margins for simple/hydroskimming refineries in the ARA region fell by $2.80 per barrel over Dated Brent from October's level, averaging $1.19 per barrel in November. The deterioration in heavy fuel oil discounts accounted for half of the decline, with the large drop in gasoline values contributing $0.87 per barrel to the fall. * The drop in gasoline premiums was the principal reason for the fall in ARA complex/cracking refineries. Using CERA's illustrative yield patterns, gross margins averaged $3.30 per barrel in November; this is $2.93 per barrel lower than October's average, of which $1.74 is attributable to the poorer gasoline premiums, with the remainder of the difference attributable equally to the declines in middle distillates and residual fuel oil values. European Inventories and Refinery Operations* * EU and Norwegian refinery crude intakes rose by a further 168,000 bd in November, averaging 12.6 million barrels per day (mbd), again an indication of refiners seeking to maximizing runs given the current favorable margins. Output data for individual products are not yet available, but the high crude runs and middle distillate margins would indicate that November was another month of very high jet/kerosene and gasoil production. * Despite the strong crude runs, primary EU plus Norway crude oil inventories did increase in November, ending the month 9 million barrels higher than October's level (which was revised downward) at 426.5 million barrels. There has been a small but consistent three-month contango in the Brent futures market, placing a small premium on forward months' values of crude to the current month's, which would help to encourage stockholding. These stocks represent about 31 days' forward supply of anticipated total demand in the first quarter of next year-less than 2 days' fewer supply compared with November levels for the past two years. * Primary gasoline inventories fell in November from 154 million barrels to 150 million barrels, contrary to typical seasonal patterns. This may reflect the relatively low levels of gasoline production over the past few months, and certainly current gasoline differentials to crude are not encouraging high gasoline production levels. Nevertheless, this is a potential cause for concern as it may lead to significant market volatility during the first quarter of next year. * Primary middle distillate inventories, however, are continuing to improve. October's total was revised upward slightly to 333 million barrels, and November ended at 334 million barrels. In addition to record levels of refinery production, exports from Russia are proving to be plentiful, with November's total exports from the former Soviet Union averaging 460,000 bd. A strong transatlantic arbitrage, however, has been causing most of these cargoes to go direct to the United States rather than stay in Europe. **end** This CERA Alert will be available in PDF format within 24 hours. ********************************************************************** This electronic message and attachments, if any, contain information from Cambridge Energy Research Associates, Inc. (CERA) which is confidential and may be privileged. Unauthorized disclosure, copying, distribution or use of the contents of this message or any attachments, in whole or in part, is strictly prohibited. Terms of Use: http://www.cera.com/tos.html Questions/Comments: webmaster@cera.com Copyright 2000. Cambridge Energy Research Associates
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