REFINERY MARGIN TRACKER: US gets lift from Hurricane Laura; Asia and Europe soften

New York — US refinery margins rose for the week ended Aug. 28 as US Gulf Coast refiners shut in refinery capacity ahead of Hurricane Laura, according to an analysis from S&P Global Platts on Aug. 31.

But European and Asian margins were flat to weaker, yet to reap the benefit of the storm which made landfall on Aug. 27 as a Category 4 storm near the Louisiana-Texas border.

Primarily impacted were refineries around the Lake Charles, Louisiana, and Port Arthur and Beaumont, Texas region, boosting US Gulf Coast margins. More than 2.3 million b/d of USGC refining capacity was taken offline ahead of Laura's arrival.

US Gulf Coast cracking margins for WTI MEH rose to $6.27/b for the week ended Aug. 28 from an average $5.18/b the prior week, according to S&P Global Platts Analytics.

Some analysts, including Phil Gresh at J.P Morgan, expect that around 1.5 million b/d of refinery capacity will be offline for two weeks, to be reflected in weekly US Energy Information Administration data.

"For the EIA week ending 8/28, we still estimate [about] 1.5 [million b/d] of average capacity offline. For the EIA week ending 9/4, we now see [about] 1.6 [million b/d]," he said in an Aug. 30 research note.

Citgo's 418,000 b/d Lake Charles plant sustained some damage and Gresh estimates it could take four to six weeks to repair. Gresh puts the timeline for restart of Phillips 66's 260,000 b/d Westlake plant in the Lake Charles region at two weeks due to fire at a nearby chemical plant.

But lack of power and damage to water supply infrastructure are creating difficulties. Many of the workers have lost their homes in the storm, only two of the six water supply sources are working and out-of-state utility workers are trying to repair power infrastructure.

"We don't have a firm grip on the extent of the damage," said a spokeswoman for the Louisiana Department of Environmental Quality about the overall impact of Laura on the region.

USAC refiners up runs

On the US Atlantic Coast, refining margins rose along with refinery run rates.

USAC Bakken cracking margins for the week ended Aug. 28 averaged $3.48/b, compared with $1.90/b the prior week.

Phillips 66, which rails about 70,000 b/d of Bakken crude to the plant from North Dakota, has been increasing runs at its USAC plant.

"We are up somewhere north of 200,000 b/d," said a source familiar with refinery operations at Phillips 66's 258,000 b/d Bayway refinery in Linden, New Jersey, or about 77% of capacity.

USAC refinery utilization averaged 69.7% for the week ended Aug. 21, according to most recent EIA data.

Kpler vessel tracking data shows refined products imports into the USAC rising the last two weeks of August, some of which may have been driven by a wider gasoline arbitrage from Europe.

But the increase appears to be temporary, as the Colonial Pipeline continued to operate during and after Laura. Colonial Pipeline's 1.37 million b/d gasoline pipeline starts in Pasadena, Texas, and ends in Linden, New Jersey.

Margins in for Northwest Europe refiners actually fell for the week ended Aug. 28, with Bonny Light cracking margins averaging $1.78/b compared with the $1.90/b the week earlier, Platts Analytics margins showed.

The gasoline arbitrage from Europe to the USAC was already open ahead of Laura's hit, trade sources said, adding gasoline cracks in the oil hub of Amsterdam-Rotterdam-Antwerp recently rose above those of diesel for the first time since May 2019.

USAC gasoline stocks have tightened. At 63.7 million barrels the week ending Aug. 21, stocks were on par with the five-year average, down from a 15% surplus in early June, EIA data showed.

In the Mediterranean, cracking margins for benchmark CPC blend dropped to $2.39/b for the week ended Aug. 28 from $2.74/b the week ended Aug. 21.

Singapore margins fell further into the red, with benchmark Dubai cracking margins averaging minus $1.98/b for the week ended Aug. 28 compared with the $1.80/b the week earlier as Chinese exports remained strong.

The high volumes of gasoline exports from China seen in August are expected to remain steady in September at between 1.4 million to 1.5 million mt.