11-03-14: ARA Tank Storage Market – US Refineries

Drivers of ARA Tank Storage Markets

The tank terminal market for storing oil products boomed from 2008 till 2011 but has undergone some major changes in recent years. Current signs are that the hey-days are over and that the market is normalizing. However, looking at expected changes in global fundamentals the tank terminal market is up for a rough ride indeed!

PJK International has made a detailed study of the tank terminal market. It focuses on the central issue of profitability for storage companies in the ARA-region.

  • How will profit potential evolve in the medium term for tank storage companies?
  • How will the tank storage demand per product group change?
  • How will these tank storage drivers impact storage rates?
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Tank Storage driver: US Refining Renaissance

In recent years the petroleum – and petrochemical industry in the US has undergone significant changes. These changes are a consequence of the shale gas and light tight oil revolution. Due to so-called fracking techniques non-conventional gas and oil production in the US has surged. Crude production in the US which was in constant decline till 2009, has increased from a low of around 5mb/d to above 8mb/d. As a result WTI crude prices in the US have been trading at a discount to Brent prices from 2010 till now.

Natural gas prices in the US have been the lowest in the world for the last couple of years and this situation is expected to persist. US refiners are enjoying a cost advantage compared to European refineries due to these lower gas and crude prices. Due to the added US crude supply, which has replaced heavy crude blends, production of gasoline and middle distillates has also increased. At the same time domestic US consumption of oil products has gone down compared to pre-crisis levels. As a result US is importing less gasoline and exporting more distillates and this trend is expected to continue.

The European refining and petrochemical industry is experiencing more competition in the global market from US competitors. In this study it is analyzed how US export volumes are expected to develop and how this will impact product flows and tank terminal operations within ARA.

These questions and others were studied by looking at important themes that could potentially impact market fundamentals. If you are in anyway interested in this industry, you will find this study essential for your view on the market.

For promotional purposes, PJK International has made a short summary of the study. In this e-paper the contents of the study is further highlighted by giving a limited overview of important themes that have been analysed thoroughly. We will start by looking at how European refinery closures might impact tank storage markets. Second transit flows from Russia to Asia, specifically fuel oil flows, will be highlighted. Third, the influence of US refining renaissance is analysed and fourth, capacity developments are mapped out. Finally, storage rate developments are analysed.

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PJK International, Tank Terminal Specialist

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The integral study became available at the end of February 2014. If you would like to acquire more in-depth knowledge about the tank terminal market study after reading this paper, please contact PJK International via mail: info@pjk-international.com or call: +31(0)-76-7676323. You can also pre-subscribe via our website and we will contact you about further deliverables.