REFINERY MARGIN TRACKER: Refinery margins soften as Colonial Pipeline resumes operations

Despite showing week-on-week gains, global refinery margins by the end of the week slipped as the Colonial Pipeline restarted operations following a May 7 ransomware attack, an analysis from S&P Global showed on May 17.

The shutdown of the 5,500 mile pipeline – the largest US refined product pipeline -- which carries about 45% of the gasoline, ULSD, and jet used on the US Atlantic Coast from US Gulf Coast refineries, increased USGC exports and opened the arbitrage for more gasoline and ULSD to flow into the USAC.

USAC cracking margins for Urals crude averaged $10.22/b for the week ended May 14, compared with the $10.05/b the week earlier, S&P Global Platts Analytics data showed.

After a reaching a high of $10.70/b on May 12, the margin eased to the week's lowest level of $9.72/b by May 14, the day after Colonial Pipeline said it was restarting operations.

While some USGC refiners curbed rates, the cutback was minimal, bringing global refining downtime to 18.62 million b/d for the week ended May 14, according to S&P Global Platts Analytics, which forecasts global downtime will ease to 17.4 million b/d for the week ended May 21 as USGC refiners ramp up and maintenance at some Asian plants is completed.

Shifting tanker flows

While the Colonial Pipeline supplies about 45% of the gasoline and diesel used on the USAC, most of it is taken off in the southeastern part of the country, the area hardest hit by the fuel disruptions.

Trucks were deployed in the Southeast to help provide additional trucking capacity to move fuel into areas without alternate fuel delivery systems, including Georgia, South Carolina, North Carolina and Virginia.

As of late May 13, Colonial said it had delivered about 967,000 barrels to these various delivery points, according to a shippers' note. The pipeline said it had also taken delivery of 2 million barrels of refined products from refineries as it prepares to ramp up.

Shipping flows were also diverted, with three vessels originally destined for New York, rerouted to Yorktown, Virginia, Baltimore, Maryland and Norfolk, Virginia.

One vessel with 370,000 barrels of gasoline was reportedly diverted to Yorktown, Virginia, to help bolster supply there.

Gasoline imports fixed into the USAC from Northwest Europe averaged 383,000 b/d for the week ended May 14, according to Kpler ship tracking data, rising 214,000 b/d from the week earlier.

NWE refiners saw a slight uptick in weekly margins, with cracking margins for Forties averaging $2.66/b for the week ended May 14, reaching a high point on May 10 of $2.89/b but ending the week at $2.13/b on May 14. For the week ended May 7, Forties cracking margins averaged $2.66/b.

In the Mediterranean, refiners saw a week-on-week dip in margins, as gasoline exports to the USAC fell.

Benchmark CPC blend cracking margins averaged $6.07/b for the week ended May 14, compared with the $6.37/b the week earlier. Gasoline exports from the region to the USAC, which had been quite healthy, fell 62,000 b/d week-on-week to average 79,000 b/d for the week ended May 14, Kpler data showed.

Exports from USGC rise

Despite a lack of refined product pipeline egress to the USAC, USGC margins rose, with cracking margins for American GulfCoast Select crude averaging $14.37/b for the week ended May 14, up from the $13.55/b the week earlier.

The margin hit a high of $14.87/b on May 11 before falling back to $13.98/b on May 14.

The rise was due in part to higher exports and some run slowdowns.

Citgo said it trimmed runs at its Lake Charles, Louisiana, plant and market sources said that run reductions at Motiva's Port Arthur, Texas, plant and the Total S.A. Port Arthur, Texas, refinery were precipitated by an earlier power outage.

Platts Analytics calculated that the run slowdowns among USGC refiners were 4.21 million b/d for the week ended May 14.

Exports of gasoline, jet and diesel from the USGC averaged 5.306 million b/d for the week ended May 14, compared with the 4.276 million b/d for the week earlier, Kpler data showed.

About 657,000 b/d of that went to Mexico, including a ship initially fixed by Valero as floating storage.

Valero, and other refiners, had chartered non-Jones Act tankers on which to store refined products. Most of the vessels subsequently were used to export products, but Valero also received a Jones Act waiver, according to sources familiar with the situation.

Asian refined products imports to Mexico also rose, averaging 56,000 b/d for the week ended May 14, 25,000 b/d higher than the week earlier, making up for the loss of output from the Minatitlan refinery, which remains offline after an April 8 fire and explosion.