The crude markets weakened further driven by the overhang of excess supply in the physical market. The Atlantic basin is flooded with crude, and it will likely persist until European refiners come back from maintenance. Even when they return, we expect it to be below normal seasonal run rates. The overhang in the Atlantic Basin and discounts growing on global physical grades will result in a sizeable slowdown in U.S. exports. We expect to see a reduction of U.S. exports by 300k-400k barrels a day, which will build quicky in PADD3. Since U.S. refiners have already maxed out their runs of U.S. shale, the only outlet is the global market. Many refiners have already purchased for summer runs, and it’s been very underwhelming. Here is a snapshot of some of those pressure points and regions with broader overhangs:
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