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Refinery Margin Tracker: US refiners play balancing game to match supply, demand

US refiners are keeping margins afloat by deftly balancing supply and demand as the coronavirus pandemic continues to set the pace for refinery output, an analysis from S&P Global Platts showed Aug. 10.

US refinery utilization has hovered around 80% of capacity, but rates across regions have been uneven. US Atlantic and West Coast refinery utilization rates were 52.1% and 70.2% of capacity, respectively, according to most recent Energy Information Administration data for the week ended July 31.

Refiners along the US Gulf Coast and Midwest are faring better, averaging 82.3% and 86.4% of capacity, respectively, during the same time period.

But as demand creeps higher, inventories will fall and utilization should start to rise.

“Utilization rates will likely stay on the low end of the range until the product surplus can be absorbed. Gasoline balances looked far better than distillate, but just as the crude market had a miraculous recovery over the past few months, so will oil products,” said PBF’s CEO Tom Nimbley on the company’s July 31 second quarter earnings call.

PBF’s refinery system spans the USAC, USGC, Midwest and USWC, giving the company a good feel for regional refining trends.

“Overall, we ran a refining system at approximately 70% of capacity, with the East Coast and [Midcontinent] seeing the lowest utilization. Our utilization going forward will simply be determined by demand and inventory levels,” said Matthew Lucey, PBF’s President on the second quarter call.

PBF kept units offline after completion of turnarounds at its Paulsboro, New Jersey, plant and its Toledo, Ohio, plant. PBF has since started up a number of units shut and idled during the demand trough, CEO Nimbley said.

“The Paulsboro cat cracker has been started back up. The Toledo cat cracker has been started back up. We continue to watch it very closely, but we do have the ability to — and have — slightly increased utilization,” he said.

However, as PBF brought Paulsboro back online, USAC cracking margins slipped. Bonny Light cracking margins averaged $2.46/b for the week ended Aug. 7, compared with the $3.63/b the week ended July 31, according to S&P Global Platts Analytics.

Nimbley said PBF’s six-refinery system is running below the 80% utilization generally seen across the country.

“We’re below that. We’re going to be very disciplined and make sure this light at the end of the tunnel is not a train,” he said.
USGC inventories beckon exports

USGC distillate inventories are at the high end range of the five year average, at 61.8 million barrels as of July 31. USGC gasoline stocks are also inflated, at 91.9 million barrels for the same time period. The inventory growth is due in part to lagging exports particularly to the southern hemisphere.

“We need a good export market to clear the barrel,” Nimbley said. “We don’t have that on gasoline right now. We have pretty good distillate exports. And the forecast going forward….is that exports into Latin America, both on gasoline and distillate will increase.”

Kpler commodity tracking data shows USGC diesel exports will reach 2.32 million b/d for the week ended Aug.14, and gasoline exports will rise to 1.30 million b/d.

USGC cracking margins for WTI MEH have drifted slightly lower for the week ended Aug. 7, averaging $4.64/b, down from the $4.87/b the week earlier.

Nimbley expects total exports to Latin America to rise by 255,000 b/d in the third quarter over the second quarter.
Source: Platts

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