REFINERY MARGIN TRACKER: Russian crude margins rise on falling prices as refiners shun supply

Russia's military incursion into the Ukraine and subsequent sanctions levied by the US and other nations have most refiners stepping away from buying Urals and CPC Blend crude, despite higher refinery margins due to the lower crude price, an analysis from S&P Global Platts showed Feb. 28.

As of Feb. 28, actual volumes of Russian crude exports from its two key export terminals in Primorsk and Novivorosiisk dropped to 661,000 b/d, of which 622,000 b/d is heading for the Petromidia refinery located Black Sea in Romania. Crude export volumes are severely lower than the 3.87 million b/d exported Feb. 27 and 4.8 million b/d Feb. 24, according to data from commodity tracker Kpler.

For the week ended Feb. 25, the Urals discount to Brent futures widened to average $9.02/b, out from the $4.42/b the week ended Feb. 18 and $2.55 for the week ended Feb. 11, Platts price assessments show.

As a result, margins increased, with Urals margins for both coking and cracking in the Western Mediterranean averaging $12.57/b for the week ended Feb. 25, compared with $9.35/b the week earlier, according to S&P Global Platts Analytics margin data.

Start of maintenance season

The drop in the price in Urals coincides with the start of seasonal maintenance at many refineries, which have refiners dialing back crude imports all together as they take down units for planned work.

According to Platts Analytics, February global crude distillation unit downtime is expected to average 10.5 million b/d, up 516,000 b/d from January, on both planned work and coronavirus-related issues.

The US is expected to account for most of the CDU outages, with 2.5 million b/d offline in January and 2.85 million b/d offline in February, due in part to extreme cold weather which impacted large USGC refineries. In March, US CDU downtime is expected to reach 4 million b/d.

Much of Russian crude imported into the US goes to the US Atlantic Coast refineries of Monroe Energy and PBF Energy. The year through Feb 10, US imports of Russian crude have averaged just under 900,000 b/d, according to US Customs data, of which about 26,000 b/d of early January barrels went to Chevron's 269,000 b/d El Segundo, California, refinery.

Kpler data shows the last cargo of CPC Blend headed for the US departed for Wilmington, Delaware, home to PBF's 171,000 b/d Delaware City refinery, on Feb. 14, well before any sanctions on Russia were imposed.

USAC margins for Urals averaged $16.83/b for the week ended Feb. 25, up from the $12.66/b for the week ended Feb. 18, and surpassing margins for Nigerian and US domestic crudes like Bakken.

A spokesperson for PBF Energy was not immediately available to comment.

However, Chevron spokesperson Kelly Russell said in a Feb. 28 email, "As a matter of company policy, Chevron does not discuss commercial agreements, but as always, will comply with all current and applicable laws and regulations. We are closely monitoring developments in relation to impacts in Europe."

Urals margins for Northwest Europe refiners averaged $12.32/b for the week ended Feb. 25, Platts Analytics data showed, up from the $9.63/b the week earlier. Kpler data showed only one 39,000-barrel cargo heading into the region, bound for Neste's Porvoo refinery.

Only one Urals cargo was seen fixed for China: a 564,500 barrel vessel into Ningbo on Feb. 21, according to Kpler data. Urals margins for China averaged $8.86/b for the week ended Feb. 25, up from $6.05/b the week earlier, Platts Analytics data showed.