US Gulf Coast motor fuel exports driven by diesel/gasoil are bound towards record high levels as 2024 comes to an end. Slowing demand in domestic markets as well as building domestic stocks, combined with high refinery utilization from Gulf Coast refiners are likely behind this push towards the export markets.
December exports a likely record high
US Gulf Coast Motor fuel exports rose 22% m-o-m in November to 2.1mbd, reaching seasonal highs with preliminary December (days 1-15) exports marching towards record highs already at 2.5mbd. Most of this is being driven by diesel exports towards Europe and Brazil but also gasoline stock builds in the US which we shall discuss in some detail. According to the EIA, US motor gasoline stocks even though near the lower end of the five year range have been climbing since November. This remains the case with PADD 1 which is a key gasoline import market as well as PADD 3 pointing towards slowing domestic gasoline demand in line with seasonal norms. But, refinery utilization on the USGC has remained strong above 90% since mid-October and touching 95% over the past two weeks, according to the EIA. These have forced Gulf Coast refiners towards waterborne markets to clear these products, with gasoline going to either LatAm markets or into the Caribbean storage hubs, likely to be re-exported to PADD 1.
Diesel leads the charge
Diesel exports have remained healthy since the second quarter of 2024 and it looks like they will end the year on a strong note. USGC diesel/gasoil exports rose 25% m-o-m in November to 1.2mbd with preliminary data for December (days 1-15) suggesting exports reaching 1.3mbd. Northwest European buying has been supportive, accounting for 23% of USGC exports so far in December (days 1-15). Geopolitical events over the past few years, driving supply uncertainty for European buyers have incentivized them to take in more of the USGC barrels and they have continued to do so even when they have remained well-supplied with intra-European and East of Suez barrels. USGC diesel also made a comeback in Brazilian markets as Russian diesel supply was reduced by refinery attacks and domestic demand. But, these Russian barrels are set to return and this would mean increased competition for USGC diesel in Brazil. Finally, some export growth can also be attributed to barrels going to the Caribbean, which similar to gasoline might be re-exported eventually.
Falling MR availability drives up freight
US Gulf Coast MR freight ($/ton, LHS) and MR ballasters towards US Gulf (no. of vessels, RHS)
This increase in exports has been positive for MR freight, with especially TC14 (US Gulf to Continent) and TC18 (US Gulf to Brazil) rates moving upwards. Freight rate levels though have remained below the increases observed during the periods of March-April and June-July of this year and well below year-ago levels. The falling ballast MR availability however suggests that this time freight price should sustain the rally going into 2025.
