REFINERY MARGIN TRACKER: Refinery snag, tighter inventories buoy US Midwest coking margins

Stronger US Midwest refining margins were supported by tighter inventories, rising regional demand and the shutdown of a coker at the region's largest refinery, a July 26 analysis from S&P Global Platts showed.

According to several sources familiar with the situation, BP shut down a coker at its 435,000 b/d Whiting, Indiana, plant last week for unplanned work, and the unit is expected to be down for two to three weeks for repair.

A company spokesman declined comment on the refinery's operational status.

The outage supported higher distillate product prices, pushing the Chicago jet-to-NYMEX ULSD differential to minus 13.33 cents/gal for the week ended July 23, up from minus 14.25 cents/gal the week earlier and the strongest level since the week of May 23, according to S&P Global Platts assessments.

And the Chicago ULSD-to-NYMEX ULSD differential flipped into positive territory for the first time since the end of May. The differential for the week ended July 23 averaged 75 points/gal, up from minus 1.65 cents/gal the week earlier.

Lower demand shaves WCS price

Despite apportionment on Enbridge's line and a reduction in the barrels of Western Canada Select brought into the Whiting refinery, the outage supported lower WCS prices.

Lower demand from BP's coker outage pushed down the price of WCS, supporting higher margins for the crude. WCS ex-Hardisty coking margins averaged $23.10/b for the week ended July 23, the highest since the end of May, according to S&P Global Platts Analytics.

WCS was selling at a $14.85/b discount to front month NYMEX crude futures for the week ended July 23, compared with a $13.98/b discount the week earlier, Platts data showed.

BP in 2021 reduced its minimum volume commitment with its master limited partnership, BP Midstream Partners, on the volume of crude to the refinery by 20,000 b/d last year to 300,000 b/d. The 475,000 b/d BP2 pipeline owned by BP Midstream feeds Western Canada Select to the refinery.

Inventories of Midwestern ULSD fell slightly for the week ended July 16, down 585,000 barrels to 32.3 million barrels, but stocks remain slightly above the five-year average, according to most recent US Energy Information Administration data.

Imports increase

Demand for ULSD in the Midwest is getting stronger. In April 2021, Midwest ULSD demand was 1.274 million b/d, EIA data showed, surpassing the 1.264 million b/d of average demand in 2019.

Increased demand has supported higher ULSD values ahead of the pull of autumn agricultural demand, supporting higher imports of ULSD into the region.

From mid-June through mid-July, about 333,000 barrels of ULSD, or around 9,000 b/d, has been sent from Sarnia, Ontario, into Wisconsin, according to US Customs data.

While recent imports levels are falling below the 10,000 b/d of ULSD imports seen the week ended May 21, levels are still above the 6,000 b/d of ULSD imported into the region seen in 2020 and 2019, according to EIA data.