[Global News]The increase in supply will drag down the prices of Gulf sulfur

A surplus of sulfur supply at the US Gulf coast is likely to persist through the summer as refineries in the region operate at high utilization rates to meet rising fuel demand, maintaining pressure on regional sulfur pricing.

US refineries and natural gas processors produced nearly 1.98mn t of sulfur during the first quarter this year, up by 3pc from the same time in 2022, according to data from the US Geological Survey (USGS). The gain was driven by US Gulf coast refiners, which boosted first-quarter sulfur output to 1.14mn t, up by 8pc, or 86,000t, from a year earlier, as they processed more crude oil.

In April-May, Argus estimates refiners in the US Gulf coast produced approximately 800,000t of sulfur, as the region's refinery utilization averaged 95pc in April and nearly 97pc in May, according to US Energy Information Administration (EIA) data. That would have raised total refinery sulfur output in the region in the first five months of the year to around 1.96mn t, compared with USGS data showing 1.85mn t of production in the same period last year,

Rising US production comes as global demand for sulfur has weakened, with phosphate fertilizer producers cutting back sulfur purchases because of soft demand. In the US, indications from market participants on both the supply and demand side are pointing to a second consecutive drop in the the third-quarter Tampa sulfur settlement.

Spot sulfur export pricing has also slipped on the surplus of tonnage in the region, with the Argus dry bulk assessment for the US Gulf coast falling by 44pc since 6 April, the first assessment of the second quarter, to a midpoint of $62.50/t fob as of 22 June. Port maintenance in Brazil has limited opportunities in the US' most popular destination for sulfur so far this year, while domestic demand is more or less steady with historical norms, according to market participants.

US Gulf coast sulfur output is likely to increase further. Around 400,000 b/d of new refining capacity is being added in the region between ExxonMobil, Marathon Petroleum and Valero during the first half of the year, with most of the capacity now operating.

The region had been expected to lose 264,000 b/d by the end of the year, when chemical and refining company LyondellBasell had planned to shutter its Houston, Texas, refinery. But the company has since delayed the closure and opted to continue operating the facility through 2024.

The LyondellBasell refinery typically processes heavier, high-sulfur crude oil such as those from Mexico and the Canadian oil sands. As a result, the facility can produce nearly 372,000 t/yr of sulfur, representing around 7pc of Texas-based sulfur production, according to data from the EIA.

Elevated fuel demand combined with lower crude prices are expected to bolster US refining margins throughout the summer driving season, prompting operators to maintain high throughput levels and boosting sulfur output as a result.

Source：Argus