EIA: Lackluster Consumption Depressing Distillate Cracks
6/11 11:40 AM
EIA: Lackluster Consumption Depressing Distillate Cracks OAKHURST, N.J. (DTN) --- In its latest Short-Term Energy Outlook, the Energy Information Administration forecast distillate crack spreads through the summer will remain below last year but will increase toward the end of the year when more distillate is used for heating and the corn harvest. Distillate crack spreads, the difference between the wholesale price of diesel and crude oil, in April and May averaged almost 50cts gallon, close to recent lows seen in January 2022. Less-than-usual distillate consumption over the last few months is the primary cause of recent narrowing in distillate crack spreads. "We expect distillate crack spreads to increase to about 75 cents/gal in 4Q24, which is still about 10 cents/gal less than 4Q23," EIA wrote. "In 2025, we forecast distillate crack spreads will increase overall as some refinery capacity comes offline and lower-than-average distillate inventories keep upward pressure on prices." The agency estimates domestic distillate fuel consumption decreased about 5% during the first five months of this year compared to the same time in 2023 but expects demand for the second half of 2024 will increase 1% versus second half 2023 "as some of the factors that have been limiting consumption early this year recede." EIA says on-highway trucking, the single largest end use of distillate fuel oil, has been subdued since the start of the year, as measured by the American Trucking Association's truck tonnage index. EIA expects manufacturing activity will increase over the next 18 months, supporting trucking demand and increasing distillate consumption. At the same time, the agency expects increasing substitution of biofuels in place of petroleum distillate will continue as renewable diesel production increases, which could limit consumption of petroleum-based distillate. Renewable diesel and biodiesel grew as a share of total distillate consumption from 5% in 2021 to 7% in 2023. EIA forecast the share of distillate consumption made up of biofuels will increase to 9% this year. (c) Copyright 2024 DTN, LLC. All rights reserved.
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