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Refinery margin tracker: Midwestern margins sink on weak farm demand, stockbuilds

Midwestern refinery margins last week showed the greatest decline of all US regions after US government inventory data showed the largest stock build in 20 years, with anemic diesel demand weighing on economics as wet weather kept farmers from planting, an analysis from S&P Global Platts showed Tuesday.

Midwest coking margins for Western Canada Select ex-Cushing fell to $14.90/b for the week ended June 7, compared with the $17.43/b the week earlier, according to S&P Global Platts Analytics data.

The discount held by WCS in Cushing to WTI widened last week to $5.27/b, Platts price data showed, falling below the quarter-to-date average discount of $4.28/b. In Hardisty, WCS fell to a $13.60/b discount to WTI, below the $12.42/b quarter-to-date discount.

Chicago ULSD prices bore the brunt of the weak planting demand, averaging $1.7137/gal for the week ended June 7, and fell further on Tuesday, assessed at $1.6376/gal, Platts assessments showed. .

Group 3 prices fared better as drier weather allowed more agricultural activity. Pipeline ULSD averaged $1.7481/gal for the week ended June 7, and Platts assessed it at $1.7671/gal on Tuesday.

“To reflect this weakness of farm demand, we expect distillate demand to average only 4 million b/d next week,” according to Platts Analytics forecasts.

Regional refinery restarts also added to stockbuilds. Earlier this week HollyFrontier said it restarted its 129,000 b/d Tulsa refinery which had been shut by floodwaters at the end of May.
EXTENSION OF CANADIAN CRUDE CUTS LIKELY

Midwestern margins failed to be supported by cheaper crude from Canada – the region’s major crude supplier – as it looks likely production cuts will continue.

A Minnesota court decision has pushed back the startup of Enbridge’s Line 3 replacement until mid-2021 has the Alberta government looking to extend production cuts put in place in January into next year, according to Credit Suisse analyst Manav Gupta.

“We believe this move will help Canadian crude diffs blowout,” he wrote in a Tuesday research note.

Delay of the restart of the 390,000 b/d Edmonton-to-Superior line combined with the push back to 2020 construction on the Keystone XL pipeline keeps pipeline takeaway capacity limited for Western Canadian crudes. The TransMountain expansion will help alleviate the bottlenecks but that is not expected online until late 2022, increasing the value of rail as a mode of transportation.

Midwest coking margins for Western Canada Select ex Cushing fell to $14.90/b for the week ended June 7, compared with the $17.43/b the week earlier, according to S&P Global Platts Analytics data.

The discount held by WCS in Cushing to WTI widened last week to $5.27/b, Platts price data showed, falling below the quarter-to-date average discount of $4.28/b. In Hardisty, WCS fell to a $13.60/b discount to WTI, below the $12.42/b quarter-to-date discount.
Source: Platts

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