REFINERY MARGIN TRACKER: Atlantic Basin margins rise on higher gasoline cracks

New York — Refining margins on both sides of the Atlantic rose for the week ended April 2, as gasoline demand drove cracks higher, and imports remained necessary to fill US Atlantic Coast supply gaps left by outages of US Gulf Coast refineries slowly returning to service after mid-February's polar vortex, an S&P Global Platts analysis showed April 5.

USAC cracking margins for North Sea Brent Blend averaged $6.30/b for the week ended April 2, S&P Global Platts Analytics margin data showed, with Northwest European Brent Blend cracking margins averaging $2.76/b. This compares with $5.01/b and $2.12/b, respectively, for the week earlier.

However, stripping out the value of RINs – the renewable credits US refiners need to buy or make to meet the Renewable Fuel Standard – the USAC Brent cracking margin averaged $1.75/b for the week ended April 2, putting actual value of USAC margins below that of Northwest Europe.

Mediterranean refiners also continued to benefit from sending gasoline barrels to the USAC, keeping their margins healthy, with volumes averaging 71,000 b/d for the week ended April 2, according to Kpler commodity tracking data.

Cracking margins for CPC Blend – a mainstay crude of the Mediterranean refiners – averaged $5.52/b for the week ended April 2, compared with the $6.61/b for USAC cargoes, which excludes RINs values of $4.41/b.

Imports to taper off as USGC plants return

Gasoline and naphtha imports into the USAC averaged 927,000 b/d for the week ended April 2, according to Kpler commodity tracking data. This included 625,000 b/d worth of cargoes from Northwest Europe and Mediterranean refineries, but also shows an increase of cargoes from Canada.

Irving Oil – operator of Canada's largest oil refinery, located in the country's eastern Atlantic Provinces -- sent 217,000 b/d of gasoline and naphtha to the USAC for the week ended April 2, with the lion's share going to its regular New England service area to supply their retail outlets and offtake supply contracts. This is above the four-week average of 165,000 b/d.

Included in Irving's exports from its 330,000 b/d Saint John, New Brunswick, facility were two fairly unusual cargoes: 318,736 barrel cargo to Port Canaveral, Florida, and a 127,268 barrel cargo to Buckeye's Port Reading, New Jersey, two destinations that are generally supplied from USGC plants, Kpler data showed.

However, as USGC plants restart, the number of gasoline cargoes going to the USAC from Europe are expected to drop off to average 339,000 b/d for the week ended April 9, Kpler data showed.

Slow comeback

US Gulf Coast margins gained on stronger demand despite plants returning to service after a bout of severe cold hampered repairs, created cracked pipes and damaged other infrastructure. US gasoline demand is gaining on warm weather and the continued rollout of the coronavirus vaccine, rising to 8.9 million b/d for the week ended March 26, 245,000 b/d higher than the week earlier, the most recent weekly Energy Information Administration data showed.

The rise in demand is played out in stronger margins. The USGC WTI MEH cracking margins averaged $12.90/b for the week ended April 2, which, when excluding RINS averaged $8.24/b, Platts Analytics margin data showed. Most recent EIA data showed USGC refinery utilization rose to 83.1% of capacity for the week ended March 26, from the 78.9% the week earlier.

USGC refinery conversion unit downtime – including cokers, fluid catalytic cracking units, and hydrocrackers – in April is expected to drop to 3.1 million b/d, compared with March's 3.77 million b/d. Outages are expected to continue to decline over the second quarter as demand picks up with the advent of the summer driving season and pent up demand from lockdowns.

Platts Analytics forecasts April's global refinery runs to increase by 800,000 b/d, up from March's 74.4 million b/d, with utilization averaging 87.1%, compared with March's 87.6% due to planned work and operational cutbacks in some regions, including parts of Asia and parts of Europe.

Conversely, US refinery utilization is picking up, with expectations of US refinery runs to increase by 1 million b/d in April to just over 15 million b/d from March's level of 14 million b/d.