US Rate decline in December – Lorentzen & Stemoco

Crude oil prices have been falling at the same time as improvements in the supply demand situation for products.

This means that refineries will try and improve throughput to take advantage of increasing prices and margins. The underlying fundamental demand is not so important as long as it is the nominal stock levels that set the prices and thus also the refinery margins. For example, US distillate stocks on 1 November were 4.9% below the level on the same date in 2001 and 0.7% below the average level for the last two years. US gasoline stocks on 1 November were 7.2% below the level on the same date in 2001 and 6.7% below the average level over the last two years.

In addition, hurricanes in the Caribbean, causing closure of refineries with production losses and stock depletions, and delays in Bosphorous due to new regulations for passing the Straits have added to the factors tightening the market.

When refinery margins fall back, refineries will reduce their purchasing of oil and this could easily happen at the same time as tonnage looking for freight is accumulating. The situation for December may therefore, according to Lorentzen & Stemoco, easily become less favourable, unless the market is saved by an extremely cold winter.