The Big Game Changer: U.S. Crude Oil Exports are Challenging Refiners

Big Game Changer SocialWe are in week #3 of our blog series in which we cover key points from our recent webinar with PwC on market trends and business challenges for fuel consumers, fuel marketers, and fuel refiners. Today, we will discuss the key challenges refiners are facing due to the U.S. crude oil export boom.

Crude oil exports are creating challenges and opportunities in feedstock management.
Prior to the recent U.S. export boom, refinery feedstocks for many Gulf Coast refiners were sourced from fields in Texas and Oklahoma, or imported from abroad. For instance, a gulf coast refinery in Corpus Christi could once count on a steady supply of Eagle Ford crude. Even though this crude is light and sweet, it would be blended down in quality to meet Gulf Coast refiner’s needs.  With no ability to export, producers and marketers had no other options for this crude. In this captive market, crude oil production increases were once considered an advantage for refiners because those increases usually decreased their feedstock costs or mitigated rising costs, but today is a different story.

Today, an increase in domestic crude oil production, coupled with the option to export means domestic crude oil can be exported to markets where light sweet crude commands a premium. The producers and marketers also avoid having to blend their product. Now that an increase in supply has led to more exports and in some cases decreased the supply of the usual feedstocks in some areas, refiners are having to rethink their feedstock supply strategy. A Corpus Christi refiner, who in the past relied on Eagle Ford crude and imported crude, now has to examine other options like:

  1. Sourcing from the Permian Basin in TX
  2. Sourcing from Bakken in ND
  3. Increasing imports

Evaluating these options is challenging; and refiners need a real-time view of what their optimal feedstock mix is, where they pull it from, and how they get it there.  In today’s competitive market, having a flexible approach to feedstock sourcing and the means to manage the increased flexibility is critical in order to maintain margins.

Effective feedstock management requires a best-of-breed CTRM system.
Feedstock management is becoming ever more complex, as the U.S. becomes a major crude oil exporter.  There is a lot of data and calculations involved in even evaluating feedstock alternatives, to find the one most suitable for your business and making the right decision is much easier with a good CTRM system. After deciding upon alternatives, managing the trading to secure feedstocks, logistics to supply feedstocks, the feedstock inventories themselves, will also be much effective and efficient with a good CTRM system.

Rethinking one’s feedstock management strategy is difficult and requires the analysis of a lot of data, which means implementing this strategy is even more difficult.  A CTRM system can be a single source of truth for all your data and the ability to analyze the impact of strategic decisions.  Once the strategy is chosen, a CTRM system can aid in the execution of the strategy by automating all of the calculations required and providing information and insight of what is happening with your feedstock.

To learn how Allegro’s commodity management software can help you manage your refined products feedstocks, click here.

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