Planned refinery outages through first half of the year not expected to constrain availability of transportation fuels

The U.S. Energy Information Administration’s (EIA) latest analysis of planned refinery outages during the first half of 2017 finds that such outages are not expected to cause a shortfall in the supply of petroleum products including gasoline, jet fuel, and distillate fuel, relative to expected demand, either nationally or within any U.S. region. This result occurs despite the current high level of U.S. gasoline demand, which in 2016 was as high as or higher than in any past year.

National supply and demand balances have limited implications regionally because pipeline infrastructure, geography, and marine shipping regulations constrain the amount of product that can flow between regions in the United States. Likely supply available despite planned refinery outages appears to be adequate in all regions

EIA’s national and regional conclusions are the result of simulating regional supply on a monthly basis based on a set of assumptions about refinery operations. The report considers planned shutdowns of refinery units as reported by Industrial Info Resources (IIR) and provides EIA’s analysis of the implications of outages affecting atmospheric crude distillation units, fluidized catalytic cracking units, catalytic reforming units, hydrocracking units, and coking units. Barring unusually high unplanned outages, planned outages that extend beyond schedule, or higher-than-expected demand, the supply of gasoline, jet fuel, and distillate fuel is expected to be adequate in all regions through June 2017.

Planned outages in the Gulf Coast region for the first half of 2017 are higher than average, but regional inventories appear to be sufficient to offset lost production from those planned outages. The Gulf Coast region contains more than half of the U.S. refining capacity, and as a result produces far more petroleum products than it consumes. The region’s surplus production supplies other U.S. regions, most notably the East Coast and the Midwest, as well as international markets. EIA’s calculations indicate above-average Gulf Coast production reductions due to planned capacity outages, with gasoline reductions from full capacity production of roughly 344,000 barrels per day (b/d) in both February and March, and 311,000 b/d of distillate fuel in February and 246,000 b/d in March. In total over the first half of 2017, gasoline reductions represent 27% of current inventory, jet fuel reductions represent 28% of current inventory, and distillate reductions represent 26% of existing inventory. With Gulf Coast gasoline and jet fuel inventories at their highest level in 10 years, distillate inventories close to the 10-year average, and high levels of gasoline and distillate exports that could be diverted to domestic markets to offset reductions in refinery production, there are several options to make up for production losses due to planned refinery outages in the Gulf Coast.

Planned outages in the Midwest region for the first half of 2017 are lower than average levels for all types of refinery units, so supply of petroleum products is likely to be adequate to meet domestic demand in the Midwest during the first half of 2017. Production losses from planned outages in the Midwest are expected to reach their highest level in April, with slightly lower losses in May. Total estimated production losses for gasoline, jet fuel, and distillate fuel over the first half of 2017 are equivalent to 7%, 16%, and 6%, respectively, of existing inventories in the region as of January 20. The Midwest has 21% of the nation’s refining capacity and represents 25% of total U.S. demand for petroleum products. As a result, Midwest refineries produce most of the gasoline and distillate fuel consumed in the region, particularly during the winter when consumption is lower. Additional supply is available from inventories and from the Gulf Coast, if needed.

Planned outages in the West Coast region for the first half of 2017 are close to average, and regional inventories appear to be sufficient to offset lost production from brief periods of higher planned outages. The West Coast has 16% of the nation’s refining capacity and represents 15% of total U.S. demand for petroleum products. Planned outages, which are expected to peak in March will produce cumulative reductions in petroleum product production over the first half of 2017 equivalent to 19% of existing gasoline inventory, 32% of jet fuel inventory, and 45% of distillate fuel inventory.

Planned outages in the East Coast region for the first half of 2017 are lower than average, so supply of petroleum products is likely to be adequate to meet domestic demand in the East Coast during the first half of 2017. The East Coast has 7% of the nation’s refinery capacity and represents 29% of total U.S. demand for petroleum products. Consequently, supplies are transferred into the East Coast from other regions, primarily from the Gulf Coast and from imports out of the Atlantic Basin market.

Planned outages in the Rocky Mountain region for the first quarter of 2017 are lower than average, with some higher outages in the second quarter. Regional product inventories, which are currently at or above average levels for this time of year, appear to be sufficient to offset lost production from those planned outages. The Rocky Mountain region has 4% of the nation’s refining capacity and represents 4% of total U.S. demand for petroleum products.

While unanticipated events could result in some issues, EIA’s detailed review found no region in which planned refinery outages are likely to lead to inadequate gasoline, distillate, or jet fuel supplies during the first half of 2017.