REFINERY MARGIN TRACKER: Global refinery margins rise as freeze takes out Texas plants

New York — Refinery margins around the world have risen as a prolonged bout of freezing weather hobbled refining capacity in Texas, with the biggest impact was seen in margins along the US Gulf Coast and in the Midwest, an analysis from S&P Global Platts showed Feb. 19.

Most of Texas' over 5.9 million b/d of refining capacity went offline earlier this week when frigid weather and snow swept through the region, bringing bone-chilling temperatures to plants not totally prepared for such conditions.

The extreme cold also challenged the power grid, and refineries shut in order to allow residents to use the power, decimated by issues with both thermal and renewable sources as frozen natural gas compressors in the field were matched with frozen wind turbines.

US Gulf Coast refining margins shot up, with WTI MEH cracking margins reaching $11.54/b on Feb. 18, compared with the $9.70/b the week ended Feb. 12 and the $8.43/b for the first quarter to date, according to margin data from S&P Global Platts Analytics.

USGC coking margins also jumped, as Mars coking margins reached $9.70/b com on Feb. 18, compared with the $7.78/b the week ended Feb. 12 and the $6.55/b average for the first quarter to date.

As the power grid returns to normal and warmer temperatures are on their way this weekend, many refiners are starting to assessing the impacts of the storm, including Motiva, the owner and operator of a 607,000 b/d Port Arthur refinery – the nation's largest.

"Our operations team is now conducting a full assessment of process units and supporting systems in advance of preparations for re-streaming units," according to Motiva's Feb. 19 statement.

Midwest suffering too

Extreme cold weather was not confined to the US Gulf Coast, as many refineries in the Midwest also got slammed by below-zero temperatures and power grid instability.

The Midwest cracking margin for WTI ex-Cushing reached $11.38/b on Feb. 19, compared with the $9.95/b the week ended Feb. 12 and the quarter-to-date average of $6.89/b.

However, margins were higher in the Group 3 market surpassed that of the Midwest as a whole as a spate of weather-related refinery malfunctions were reported. Several Oklahoma refineries reported malfunctions to the state regulator as plummeting temperatures put a strain on the local power infrastructure, the Southwest Power Pool.

Included in this group were Phillips 66's Ponca City refinery, the East Plant at HollyFrontier's Tulsa refinery and CVR Energy's Wynnewood refinery.

Group 3 WTI cracking margins reached $14.74/b on Feb. 19, compared with the $11.49/b the week ended Feb. 12 and $11.21/b quarter-to-date average.

Returning to normal

Most USGC refineries were expected to move towards normal operations with the return of a stable power grid and reliable sources of natural gas, nitrogen and hydrogen, market sources said.

Some plants, however, were expected to take longer to restart than others, due in part to the fact that they were shut down rather quickly which creates more stress on piping and other components.

But for the most part, refineries were expected to restart relatively quickly, sources said.

While some market sources were estimating it could take months to restart some plants, others were more optimistic.

"It could be over in a couple of days. By Monday, it could be a different story," said one trader.