US export ban could propel diesel cracks by $150/b - Goldman

Quantum Commodity Intelligence - An export ban on US oil products would propel gasoline cracks elsewhere in the world by $50/b and diesel by $150/b while forcing US refiners to slow throughput to prevent a stock build up, investment bank Goldman Sachs said.

The Biden administration has been mulling such potential export restrictions over the past months to lower domestic retail gasoline prices, in a bid to crank up the President's approval ratings.

"This would exacerbate the shortage of refined products elsewhere, requiring sharp spikes in refining margins and product cracks in Europe and Asia to destroy a commensurate amount of demand," the investment bank wrote in a report published Thursday.

Goldman estimates gasoline cracks to rise by $50/b, from current levels in Europe of $18/b, while diesel would rise by $150/b – due to its lower price elasticity – from the current $53/b.

However, such a ban would likely only come after the November 8 mid-term elections, as the White House has said it is "unlikely to be announced in the near future".

Since the start of the war in Ukraine, the US has seen a sharp rise in its product exports as buyers elsewhere seek non-Russian hydrocarbons, while the global refining sector remains tight post-Covid.

US net gasoline exports rose to 215,000 bpd since the start of the war, compared to net imports worth 230,000 bpd over the same period last year, IEA data showed.

At the same time, net diesel exports rose by 300,000 bpd to 1.3 million bpd year-on-year, with jet fuel shifting from net 80,000 bpd imports to 70,000 bpd exports.

"A product export ban would thus seek to leverage this net exporting position to lower domestic prices. Effectively, it would trap refinery output within US borders, leading to steep domestic discounts as inventories build sharply," Goldman wrote in a report published late on Thursday.

However, a full stop in exports would cause US gasoline stocks to hit maximum levels in four months, distillates in three months and jet fuel in nine months, the bank estimated, forcing refiners to slow down.

"We estimate runs could have to be cut back by more than 1 mb/d to manage inventories in the context of export restrictions on gasoline and distillate exports."