REFINERY MARGIN TRACKER: US margins dip pre-Thanksgiving as US releases SPR barrels to cut gasoline prices
US refinery margins softened for the week ended Nov. 19, despite a fall-off in crude prices, partly on lower demand for gasoline due the increase in coronavirus cases and high prices, an analysis from S&P Global Platts showed Nov. 23.
US gasoline demand for the week ended Nov. 12 dipped 18,000 b/d to 9.241 million b/d, most recent Energy Information Administration data showed, at a time when new US coronavirus cases rose.
According to the US Centers for Disease Control and Prevention, the per capita rise to the weekly rate of 177 per 1,000 far exceeded against a desired metric of 50, according to Alan Struth, analyst with S&P Global Platts Analytics.
And coronavirus cases are expected to increase as more people travel for the Thanksgiving holiday on Nov. 25.
According to travel club, AAA, 48.3 million people or 90% of all travelers are expected to travel by car to reach their holiday destination, an increase of 8.4% over 2020 — the highest one-year increase since the Great Recession – and despite an average $1/gal increase in the price of gasoline.
In the US Atlantic Coast, the spot price of RBOB averaged $2.382/gal for the week ended Nov. 19, up from the $1.188/gal the year earlier, according to Platts assessments.
SPR, RFS and gasoline prices
The consumer outcry against higher gasoline prices has politicians launching investigations into the rising price of oil, while looking for solutions to reduce the price of gasoline.
An announcement made early Nov. 23 by the Biden Administration authorizing the release of 50 million barrels of prompt crude from the US Strategic Petroleum Reserve — done in part to mitigate the rising cost of gasoline — had the opposite effect of lower oil prices, sending crude prices up about $2/b.
By midday Nov. 23, the front-month ICE Brent crude futures reached an intraday high of $82.17/b while the intraday crude high for front-month NYMEX crude was $78.75/b, up from Nov. 22 close of $79.70/b and $76.75/b, respectively.
“On the SPR, instead of focusing on measure that would have limited, if any, impact, as evidenced by the fact crude is trading up today, the Administration could lower consumer fuel costs fairly quickly by releasing a lower renewable fuel standard (RFS). The cost for RFS compliance credits – called RINs – has added between 15 to 30 cents per gallon to the cost of manufacturing fuel this year,” said Brendan Williams, a spokesperson for refiner PBF Energy.
The Environmental Protection Agency administers the Renewable Fuel Standard and is late in releasing renewable volume obligation for 2020 and 2021, creating uncertainty for both refiners and renewable fuel producers.
“Releasing a lower standard would fairly quickly help alleviate consumer pain at the pump without doing anything to change the percentage of ethanol blended into gasoline, while protecting domestic fuel supplies and thousands of union jobs in the process,” he added.
For the week ended Nov. 19, US Atlantic Coast refiners saw a $12.48/b cracking margin for running Nigerian Bonny Light.
Subtracting out the cost of RINs puts the margin at $7.28/b, according to data from S&P Global Platts Analytics. This means a pure play refiner like PBF with no blending nor retail outlets is obligated for the $5.20/b difference.
Comparatively, a Northwest European refinery margins for Bonny Light averaged $9.22/b for the week ended Nov. 19, Platts Analytics data showed.