Why Aren’t Refiners Panicking?

Let’s think about the timing of when crude is purchased and when it’s turned into product.

Here is an example: China decides to buy an Angolan cargo for Nov 28th loading.

Depending on the size of the vessel, it will take 2-3 days to fill it with the purchased crude.

So now,  it sets sail for China on Nov 30th and takes between 35 and 55 days, depending on the port destination.

The crude will sit offshore for another 5-10 days as it waits for a dock to open up.

The physical cargo is now unloaded around Jan 14th, taking 2-3 days.

It will go into a temporary holding tank at the port for about a week.

This means it will take another week between the holding tank and the pipeline to get to its next destination: a refiner holding tank, where the crude will sit for another 2 to 4 weeks.

The oil enters the refiner around Feb 14th and, after a day or two, exits the other side as a refined product.

Now, as gasoline or diesel, it will sit in storage for another 2-4 weeks (maybe longer) as it waits to be moved into the market.

So physical crude purchased in Nov won’t start moving to the market until at least March 14th.

Let’s use gasoline as an example.

Gas will take another week to move through a pipeline or truck to the blender, where it will sit in another tank… waiting to be transferred to the rack and eventually a truck.

It will go from the truck to the gas station holding tank, eventually going into a gas tank for end-market consumption.