REFINERY MARGIN TRACKER: USGC margins hit 5-year highs as cold weather hits plants

US Gulf Coast refining margins rose for the week ended Feb. 5 as cold weather in the Texas City area caused a power outage, shutting two large refineries owned by Valero and Marathon Petroleum, analysis from S&P Global Platts Analytics showed on Feb. 7.

USGC cracking margins for WTI MEH averaged $18.11/b for the week ended Feb. 4, the highest weekly level since the $23.73/b posted when Hurricane Harvey hit the coast in August 2017, according to S&P Global Platts Analytics margin data.

USGC Mars coking margins averaged $18.58/b for the week ended Feb. 4, again reaching levels not seen since Hurricane Harvey.

Power was restored to the region over the weekend and refineries are restarting, according to market sources, but several expect that the sudden "cold shutdown" of plants could create additional problems and delay restart for several weeks.

Besides the two Texas City plants, market sources said Valero was forced to shut all units at its Houston refinery early Feb. 7, due to a utility power outage, bringing unplanned refinery outages on the USGC to 1.08 million b/d.

A Marathon company spokesperson declined comment on the status of the Galveston Bay facility, citing company policy. But market sources said the cold shutdown caused a leak of hydrochloric acid, which could complicate and push out restart timelines by several weeks.

In Tennessee, Valero's 180,000 b/d Memphis refinery was also shut by icy conditions which blanketed the region at the end of last week and over the weekend, with utility provider Memphis Light, Gas and Water Division expecting to restore power to at least 90% of all customers by the end of Feb. 7, with the remaining 10% of customers scheduled to have power returned by Feb. 10, the company said in a client notice.

A Valero spokesperson declined to comment on operations at the plant.

On the US Atlantic Coast, PBF Energy reported to regulators a problem at its Delaware City, Delaware, refinery, about which market sources say was related to the cold weather in the region.

But bad weather also cut back on demand for gasoline across the US, which dropped 3.7% for the week nationally, according to data from GasBuddy. Particularly hard hit was demand in PADD III, which includes the USGC, which fell by 9% week on week, while Midwest demand in PADD II fell 7.2%.

However, weaker gasoline demand due to bad weather widened the spread between the front-month NYMEX RBOB contract and USGC CBOB to minus 5.77 cents/gal for the week ended Feb. 4, compared with the 5.71 cents/gal discount the week earlier.

Crude exports decline, product imports rise on bad weather

However, USGC margins were supported by increased exports of ULSD and gasoline where the lion's share went to Mexico and South America.

Refined product exports rose 189,000 b/d to average 2.1 million b/d for the week ended Feb. 4, according to commodity tracking data service Kpler.

Colder weather across the US increased demand for distillates. Export ULSD prices, which averaged $2.74/gal for the week ended Feb. 4, were dwarfed by USGC pipeline prices, which averaged $2.74/gal, according to Platts assessments. The USGC crack versus front-month NYMEX futures rose about 2 cents/gal to average minus 3.125 cents/gal from the 5.15 cent/gal discount the week earlier.

While crude exports declined, due in part to slower marine traffic in and out of the USGC due to foggy weather restricting vessel flow, the price of WTI MEH did not, averaging $90.59/b for the week ended Feb. 4, compared with the $87.93/b the week earlier, according to Platts assessments.

Higher prices also showed to impact crude exports, with Kpler data showing USGC crude exports for the week ended Feb. 4 averaged 1 million b/d, down from the almost 3 million b/d the week earlier.