REFINERY MARGIN TRACKER: Recurring coronavirus fears tamp down global margins

New York — Global margins fell last week as demand for gasoline and diesel remains questionable amid uncertainty of what impact a new round of lockdowns to prevent the coronavirus spread could bring, an analysis from S&P Global showed July 20.

"No clear peaking yet in the day-on-day increase of global COVID-19 cases," S&P Global Platts Analytics said in a recent research note.

So far this year, Platts Analytics estimates that global GDP has fallen between 10% and 13% from late 2019 levels, and uncertainty abounds as to exactly where it will land as regions may be forced to put back into place restrictions after the surge in new cases as governments reopened and data which shows the virus has yet to peak in some regions.

"In the US, sharp upticks in infections in the highly populous states of Florida, Texas, and California have more than offset containment in the states of the northeast corridor, which were the first impacted," Platts Analytics wrote.

Margins weakened despite a drawdown in product stocks virtually across the globe. And refiners remain wary of restarting their plants too quickly, particularly as margins continue to fall.

USAC, Midwest margins drop despite gradual reopening of some states

The gradual reopening of facilities in mid-Atlantic states have caused the number of cases to stay steady, but also created fears a resurgence of the virus could occur.

This uncertainty has weighed on margins, with the Bakken cracking margin averaging $5.29/b for the week ended July 17, compared with the $6.88/b the week earlier, Platts Analytics data shows

In New Jersey, shore communities have seen an uptick in cases as hot weather has increased the number of beach goers and in New York City, week-on-week rush-hour traffic congestion fell to 31% from 37%, according to Tudor Pickering Holt.

"US rush-hour traffic congestion hit a standstill this week, with our 40-city index holding flat w/w at 20%," wrote analyst Matthew Blair in a research note. "Most cities held right around last week's levels, although Chicago (up to 35% from 24% last week) saw a big jump as case increases in Illinois have remained at subdued levels."

"US traffic congestion remains at about a third of last year's levels, and with the recent jump in COVID-19 cases around the US, we could start to see some congestion ease up with states slowing down reopening plans," Blair added.

Midwest margins were also weaker, with Bakken cracking margins averaging $4.68/b for the week ended July 17, compared with the $8.32/b the week earlier, despite an increase in driving in some states as the new case curve flattened. Coking margins also dropped, with WCS ex Cushing at $2.87/b compared with $5.40/b during the same time period.

Rising contagion pushes down USGC, USWC margins

The US reported a 35% increase in new cases as of July 19, compared with two weeks earlier, based on state and local health agencies and compiled by the New York Times. Florida, Louisiana and Texas are states which have shown significant growth in new cases during the time period.

US Gulf Coast Light Louisiana Sweet cracking margins dropped $1 week on week to $4.19/b the week ended July 17, Platts Analytics data showed, while Mars coking margins also dropped, shedding 83 cents/b to $3.06/b in the same time frame.

Margins got some support by exports. Diesel exports to South America, Europe and Asia averaged 9.25 million barrels in the week ending July 17, according to commodity data provider Kpler, above the 4-week moving average of 7.48 million barrels.

However, gasoline exports lagged at 320,000 barrels for the week ended July 17. But an uptick for the week ended July 24 to 1.02 million barrels is expected, Kpler data shows.

Lower USWC margins were impacted by climbing inventories of gasoline in California, which has seen a resurgence in coronavirus cases as it implements gradual reopening of the state. Most recent data from the state's Energy Commission shows that gasoline stocks rose 592,000 barrels for the week ended July 10 to 12.7 million barrels, despite a fall-off in production.

USWC cracking margins for benchmark Alaska North Slope averaged $8.24/b for the week ended July 17, compared with the $9.26 /b the week earlier, Platts Analytics data showed.

Asian cracks suffer; ARA margins falls as gasoil builds

Singapore refining margins moved deeper into negative territory despite a draw in product inventories, as total inventories remain above the five-year seasonal average at 55.5 million barrels.

Singapore Dubai cracking margins averaged minus $2.01/b for the week ended July 17, from minus $1.74/b the week earlier.

However, Platts Analytics expects Asian refinery runs to rise to 30 million b/d in the second half of 2020, down by 635,000 b/d year-on-year due to volatile product cracks and product demand recovery. Platts Analytics expects run cuts from the rest of the world to pick up the slack, forecasting a 5.5 million b/d decrease.

European margins were also weaker, as gasoil inventories rose. Northwest refinery margins for WTI MEH averaged 87 cents/b for the week ended July 17, compared with the $1.39/b the week earlier.