Due to refinery interruptions, American distillate stockpiles didn’t revive over the summer

The American distillate stockpiles, especially for fuels like diesel, heating oil, and jet fuel, have been experiencing a low point since the previous year. Even after a 30% decrease in fuel prices, the country faces issues in replenishing the oil refineries this summer. The market is exhibiting concerns about the supply of fuel resources amid the shortage, as the demands may rise along with the prices of the specific commodity.

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The key reason for this low inventory condition is the issues faced by the oil refineries that have interrupted the production rate of the distillates, which includes heating oil, diesel, and jet fuel. Phillips 66 refinery at Bayway has faced a sudden requirement for repairing its largest gasoline-manufacturing unit. At the same time, Marathon Petroleum, Texas, had a fire incident that occurred at the refinery, leading to an offline reformer unit. Moreover, the industrial production rate decreased by 10% during the end of 2022, and U.S. exports have also been at their lowest in the last two years. All these reasons indicate a reduction in industrial activities, transportation needs, and market demand for the distillates.

Reasons leading to the insufficient supplies:

Various factors played a major role in interrupting the production rate of refineries, ultimately affecting the stockpiles of oil resources. One of those factors is the increase in the rate of interest that has made carrying inventories expensive. This led the traders to drain the inventories while profiting from the cash market. Refiners had shown less interest in filling up the tanks due to the increase in costs, resulting in the oil supply shortage.

Another factor that has influenced the current situation is the rise of Russian diesel exportations to Latin America, which has shown its impact on the U.S. distillate export market on a global scale and has led to a drop marking below the rates of the year 2022 since April.

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The government still believes in the potential of the distillate market, despite the refinery situation, and considers it to be a crucial domain to improve energy security. The U.S. government aims to consistently reach its net-zero emission target by 2050.

According to Procurement Resource, U.S. refineries are facing challenges in the production of oil distillates, that had led to a shortage of oil production in the market. This led to major interruptions in stockpiling the distillates this summer. The government is taking steps to mend the situation and finds the distillate market a crucial domain to work on and improve energy security for its future goals.