US refinery margins for the week ended July 16 rose despite higher crude prices, trumped by growing demand for refined products and reduced supply due to unplanned refinery outages, according to a July 19 analysis from S&P Global Platts.
A rise in unplanned US refinery outages helped balance US crude supply with demand for the week ended July 16, when 3.16 million b/d was offline, according to S&P Global Platts Analytics. However, downtime for the week ended July 23 is expected to fall off to about 3 million b/d, increasing the pull on crude supply.
While the initial market reaction to the July 18 agreement reached by OPEC+ softened crude futures prices as the group, which includes Russia, pledged to increase July and August output by 1.5 million b/d, weaker crude prices are not expected to be long-lived.
“Surging summer demand and OPEC+ restraint, short-term fundamentals remain tight,” according to a research note from S&P Global Platts Analytics about crude supply and demand scenario.
Some analysts, like Credit-Suisse, raised their price outlooks for 2021, putting Brent at about $70/b, up from $66.50/b previously. For WTI, Credit-Suisse raised their price forecast to about $67/b from about $62/b.
Credit-Suisse analyst Manav Gupta said increased supply from OPEC+ is not enough to meet increased demand. “Even with projected supply increases, we have global crude inventory drawing by [about] 1.2 [million] b/d in 3Q 21 and [about] 1.5 [million] b/d in 4Q21,” he wrote.
USGC, USWC benefit from more heavy barrels
In the US, coker-heavy, waterborne refineries dotting the US Gulf Coast and US West Coast will benefit the most from increased access to heavy barrels, as the light-heavy spread is expected to widen back out.
So far, the third quarter Brent-Basrah Light spread is averaging $1.27/b, while the Brent-Maya spread is averaging $5.23/b, according to Platts figures. This compares with the second quarter’s $2.35/b and $6.11/b, respectively.
Recently, USWC crude imports have been heavily skewed toward Latin American grades, buttressed by some crudes from Nigeria, Russia and Eastern Canada, with lower-than-usual volumes from traditional OPEC suppliers like Saudi Arabia and Iraq.
USWC coking margins for Arab Light averaged $21.07/b for the week ended July 16, while Vasconia coking margins averaged $24.17/b, according to margin data from Platts Analytics.
Distillate cracks rose over $1/b week on week, with the Los Angeles CARBOB ULSD-Alaska North Slope averaging $14.40/b for the week ended July 16, with the Los Angeles jet-ANS crack averaging $8.85/b, supported by refinery outages, according to Platts assessments.
On the US West Coast, Marathon Petroleum’s 363,000 b/d Los Angeles refinery, Valero’s 85,000 b/d Wilmington plant, and Chevron’s 269,000 b/d El Segundo facility all reported operating problems, which played a part in reducing weekly regional crude imports to 128,000 b/d from 171,000 b/d imported in the week ended July 9.
On the US Gulf Coast, coking margins for Basrah Light averaged $9.79/b for the week ended July 16, while the coking margin for Mexico’s Maya averaged $11.22/b.
Distillate cracks also strengthened, with the jet-Light Louisiana Sweet crack up about a $1/b week on week to $6.09/b, while the ULSD-LLS crack rose over $1/b to $14.11/b.
Source: Platts