A judicious tweaking of run rates indicates refiners themselves are well aware of the ephemeral nature of summer demand, particularly this year as the U.S. continues to climb back from the devastation of Covid-19.
Refinery utilization dipped to 92.2% last week from 92.9% as plants in the Gulf Coast, Rocky Mountain and West Coast regions scaled back.
“It’s really a unique recovery,” said Trisha Curtis, co-founder of PetroNerds said. “It says a lot about the unique trends in the U.S. with folks driving more with flexible work schedules, going back to work, and many still not yet working.”
Meanwhile, exports of finished gasoline jumped 90% to 848,000 barrels a day. Strong exports are still a must for refiners as “margins are not that great and crude is very expensive,” Campbell said. But as long as they can sustain exports at these levels, “they will make hay while the sun is shining.”
It remains tough to generate profits even as higher vaccination rates has more drivers taking to the roads this summer. Refiners that once relied on heavy crude imports have had to switch to lighter, more costly domestic grades, as heavies became harder to secure. This type of crude makes less vacuum gasoil so it forces some refiners to import this feedstock to be able to run their gasoline-making fluid catalytic crackers at full rates.
Gasoline demand shows promise while diesel and jet fuel are less reliable and should keep refinery rates in check. Gulf Coast distillate inventories are 34% higher than they were in July 2019. Exports of distillates fell 16.4% last week. Jet fuel demand fell a second straight week.
“Refiners are unlikely to surge runs,” said Zachary Rogers, director of Global Oil Service at Rapidan Energy.
Refining margins (as of July 8, in $/bbl)
- Maya U.S. Gulf coking at $6.26
- LLS U.S. Gulf cracking at $8.15
- WCS U.S. Midcontinent coking at $28.06
- East Coast Forcados cracking at $3.84
- U.S. West Coast WCS crude oil 3-2-1 crack spread at $34.13
- Nymex 3-2-1 front-month crack spread at $19.98
- For more crack spreads, see CRCK