REFINERY MARGIN TRACKER: US margins weaken as gasoline demand dips

US refining margins were mixed for the week ended June 4 as crude prices rose on stock draws and as increased refinery runs added to product stocks, an S&P Global Platts analysis showed June 8.

The broad trend across the country showed a softening in cracking margins as gasoline demand slipped and stocks grew while Midwest coking margins showed some strength as agricultural demand for diesel increased with the harvest.

US refinery runs rose to 88.7% of capacity for the week ended May 28, the highest utilization since the 89.4% utilization reached at the beginning of the coronavirus pandemic lockdowns, which increased gasoline, ULSD and jet stocks.

US gasoline demand fell 333,000 b/d to 9.146 million b/d for the week ended May 28, while gasoline stocks rose to 234.5 million barrels, according to most recent Energy Information Administration data.

However, S&P Platts Global Analytics saw a steeper decline in demand for gasoline for the week ending May 28, putting the drop at 645,000 b/d to 8.878 million b/d.

Platts Analytics estimates that about 4.5 million barrels of the roughly 7 million barrels of gasoline hoarded due to the Colonial Pipeline shutdown was released into the market during the week ended May 28.

For the week ended June 4, Platts Analytics expects the remaining 2.5 million barrels of gasoline to reach the market, balanced by a forecast 126,000 b/d demand rise associated with increased driving for the Memorial Day weekend.

USAC gasoline imports drop off

The influx of stored barrels into the market is weighing on gasoline imports into the US Atlantic Coast by 94,000 b/d to 769,000 b/d for the week ended May 28, EIA data showed.

And this trend is ongoing. For the week ended June 4, USAC gasoline imports are put at 500,000 b/d, according to Kpler commodity tracking data.

According to Kpler, gasoline from storage facilities in the Caribbean and Northwest Europe into the USAC are tapering off. Barrels pulled out of St. Eustatius storage averaged 20,000 b/d for the week ended June 4, below the four-week average of 30,000 b/d.

These barrels were going to supply Buckeye's terminals in Charleston, South Carolina, and Jacksonville, Florida, among the regions hardest hit by the Colonial outage, and no regional refining capacity.

NWE barrels of gasoline and motor gasoline blending components going to the USAC dropped to 334,000 b/d for the week ended June 4, below the four-week average of 392,000 b/d, Kpler data showed.

USAC cracking margins for CPC blend fell to $14.56/b for the week ending June 4, down from the $14.78/b the week earlier, Platts Analytics margins showed. In Northwest Europe, CPC blend cracking margins fell to $6.33/b, compared with the $6.58/b the week earlier.

Gasoline and blending component imports from Mediterranean also fell, averaging 23,000 b/d for the week ended June 4, below the four-week average of 100,000 b/d, with all supply coming from Italian refiners, Kpler data showed. Cracking margins for CPC blend in the region fell to $5.44/b for the week ended June 4, compared with the $5.58/b the week earlier.

Midwest margins trend higher, USGC drops

However, weekly Midwest refining margins were mixed with cracking margins slipping and coking margins rising, with Group 3 barrels holding a premium over the broader Midwest market which includes Chicago area refineries.

For the week ended June 4, Group 3 cracking margins for WTI Cushing averaged $15.95/b, while Midwest margins for WTI Cushing averaged $15.16/b, according to S&P Global Platts Analytics margin data.

But both were down from the week earlier as regional refinery runs rose to 91.5% of capacity, the most recent EIA data showed.

But coking margins got a boost from harvest season across the region, pulling on diesel and increasing margins for WCS ex-Cushing to $17.07/b for the week ended June 4 from the $16.84/b the week earlier.

A fall-off in gasoline exports combined with stored gasoline supplies reaching the USAC weighed on some US Gulf Coast cracking margins.

The cracking margin for Light Louisiana Sweet averaged $11.64/b for the week ended June 4, down from the $11.75/b the week earlier.

Conversely, the WTI MEH cracking margin in the USGC rose to $13.37/b for the week ended June 4 from the $13.33/b from the week earlier, a function of a lower outright crude price.

WTI MEH averaged $69.26/b for the week ended June 4, while LLS averaged $70.66/b, according to Platts assessments.

Factored into generally lower USGC cracking margins was the fall-off in waterborne gasoline exports from the US Gulf Coast to Latin America. Volumes weakened to 90,000 b/d for the week ended June 4, down 328,000 b/d from the week earlier.

USGC ULSD and jet exports to Latin America were also lower, dropping 126,000 b/d to average 365,000 b/d for the week ended June 4, Kpler data showed.

However, the overall rise in USGC distillate exports to average 843,000 b/d for the week ended June 4, a function of increased flows to NWE, was not enough to counter the rise in inventories.

USGC Mars coking margins dropped 3 cents/b week-on-week to average $11.73 for the week ended June 4, from the $11.76/b, reflecting the weakening demand and rising inventories for distillates.

For the week ended May 28, total US distillate demand dropped from 4.5 million b/d to 3.8 million b/d, according to EIA data.

Platts Analytics forecast steady US distillate demand of about 3.9 million b/d for the week ended June 4, providing some support for coking margins. So far for the week ending June 11, Mars coking margins are averaging $11.70/b.