In 2020, increased propane, other HGL exports contribute to continued strong product exports despite reductions in major transport fuels

In the first half of 2020, the United States exported 5.4 million barrels per day (b/d) of petroleum products, a slight increase of 48,000 b/d (1%) from the first half of 2019. The increase in exports occurred despite global demand declines because of responses to the outbreak of the 2019 novel coronavirus disease (COVID-19). Increased exports of petroleum products from the United States came primarily from propane and other hydrocarbon gas liquids (HGL), while exports of other refined products, including gasoline, distillate, and jet fuel, decreased in the first half of 2020 compared with the first half of 2019 (Figure 1).

U.S. propane exports averaged 1.2 million b/d in the first half of 2020, an increase of 175,000 b/d (17%) from the same period in 2019, while U.S. distillate exports decreased by 72,000 b/d (6%) (Figure 2). As a result, propane became the most exported U.S. petroleum product during the first half of 2020. Propane is used as a space heating fuel, transportation fuel, or as a petrochemical feedstock. Most U.S. exports of propane are destined for use as a petrochemical feedstock, mainly by facilities in Asia and Europe. In March 2020, the Chinese government began issuing waivers for tariffs on U.S. liquefied petroleum gases, including propane. The reduction in the tariff rate helped to stimulate U.S. propane exports to Asia; China was the fourth-largest consumer of U.S. propane exports in the first half of 2020 behind Japan, Mexico, and South Korea. On a regional basis, Asia and Oceania (which includes Japan, South Korea, and China) accounted for about 683,000 b/d (56%) of U.S. propane exports. This stronger inclination towards Asian markets distinguishes propane from other major U.S. refined product exports, like distillate and gasoline, the largest shares of which flow to destinations in the Americas. U.S. exports of propane to Asia and Oceania have been increasing since 2013 and have grown by 5,600 b/d (32%) since the beginning of 2019, as of June 2020.

Distillate, which has historically represented the largest share of U.S. petroleum product exports (24% in the first half of 2019), fell second to propane. Distillate accounted for 22% of first-half 2020 U.S. petroleum product exports, or about 1.21 million b/d, decreasing 72,000 b/d (6%) from the same period last year. Distillate is used in many ways, including personal and commercial transportation, manufacturing, agriculture, and home heating.

Four out of the five top destinations for U.S. distillate exports are in the Americas, with Mexico, Brazil, Chile, and Panama receiving the largest share of U.S. distillates. The Netherlands, a key transitional destination for distillate exports to Europe, also receives significant volumes of U.S. distillate exports. Even though either Mexico or Brazil have been the top destination by volume for U.S. distillate exports every month since April 2016, overall U.S. exports to both countries decreased year over year. During the first half of 2020, U.S. exports to Mexico fell by an average of about 40,000 b/d (14%) while exports to Brazil fell by 33,000 b/d (17%) compared with the first-half of 2019. U.S. exports throughout the Americas fell by 93,500 b/d (9%) over the same period. The COVID-19 outbreak heavily affected major regional markets and the resulting demand reduction from containment efforts in these countries led to subsequent reductions in demand for imported volumes.

Although U.S. exports bound for Mexico, Brazil, and elsewhere in the Americas were the primary driver of the year-on-year decrease in U.S. distillate exports in the first half of 2020, distillate exports to Europe and Africa decreased by 17,000 b/d and 1,000 b/d, respectively, compared with the first half of 2019. U.S. distillate exports to Asia and Oceania, however, increased by 38,000 b/d (more than 200%) during the same period, putting some upward pressure on distillate exports in the otherwise low demand environment.

Reduced global demand because of responses to the COVID-19 outbreak also substantially affected U.S. motor gasoline exports, particularly in the second quarter of 2020 (Figure 3). Motor gasoline exports (including both finished motor gasoline and motor gasoline blending components) in the first half of 2020 averaged 735,000 b/d, down 148,000 b/d (17%) compared with the same period in 2019. The decrease was largest in May, when exports to Mexico dropped 293,000 b/d (65%) compared with May 2019, as case counts of COVID-19 and associated containment measures began to significantly affect demand. Mexico has consistently been the largest destination market for U.S. gasoline exports. Even though overall U.S. gasoline exports to Mexico fell through the first half of 2020 by 118,000 b/d (24%) compared with one year prior, Mexico accounted for 51% of all U.S. gasoline exports. Exports to Canada, countries in Africa, and countries in Central America and South America declined by 5,000 b/d (9%), 2,900 b/d (36%), and 47,000 b/d (15%), respectively, while exports to Asia and Oceania increased by about 22,000 b/d, a 265% increase, from the first half of 2019.

Although jet fuel accounts for a relatively small share of overall U.S. petroleum product exports, COVID-19 containment measures have significantly affected global jet fuel demand (Figure 4). As a result, in the first half of 2020, the United States exported only 134,000 b/d of kerosene-type jet fuel, a 71,000 b/d (35%) decrease from the same period in 2019. Jet fuel exports hit a low point in May, falling to just 23,000 b/d from 246,000 b/d in February, a 91% decrease over a three-month period. U.S. exports of jet fuel recovered only slightly in June, up to 44,000 b/d. The sharp decrease in exports is mirrored by similar reductions in U.S. domestic jet fuel demand, creating an incentive for refiners to reduce their production of jet fuel until global demand begins to show more substantial signs of recovery.

U.S. average regular gasoline and diesel prices decrease

The U.S. average regular gasoline retail price decreased nearly 2 cents from the previous week to $2.17 per gallon on September 21, 49 cents lower than the same time last year. The East Coast price decreased more than 2 cents to $2.11 per gallon, and the Gulf Coast, West Coast, and Rocky Mountain prices each decreased nearly 2 cents to $1.84 per gallon, $2.84 per gallon, and $2.31 per gallon, respectively. The Midwest price increased nearly 1 cent, remaining virtually unchanged at $2.03 per gallon.

The U.S. average diesel fuel price decreased nearly 2 cents from the previous week to $2.40 per gallon on September 21, 68 cents lower than a year ago. The Midwest price decreased nearly 3 cents to $2.28 per gallon, the Rocky Mountain price decreased 2 cents to $2.35 per gallon, the Gulf Coast price decreased nearly 2 cents to $2.16 per gallon, and the West Coast and East Coast prices each decreased more than 1 cent to $2.94 per gallon and $2.49 per gallon, respectively.

Propane/propylene inventories rise

U.S. propane/propylene stocks increased by 1.7 million barrels last week to 97.9 million barrels as of September 18, 2020, 10.2 million barrels (11.7%) greater than the five-year (2015-19) average inventory levels for this same time of year. Gulf Coast, East Coast, Rocky Mountain/West Coast, and Midwest inventories increased by 0.9 million barrels, 0.5 million barrels, 0.2 million barrels, and 0.1 million barrels, respectively.

For questions about This Week in Petroleum, contact the Petroleum Markets Team at 202-586-4522.