REFINERY MARGIN TRACKER: USGC margins up ahead of Tropical Storm Beta

New York — US Gulf Coast refining margins strengthened last week ahead of tropical storm Beta's arrival on the mid-Texas Coast, an analysis from S&P Global Platts showed on Sept. 22.

Beta made landfall near the Matagorda Peninsula around 10 pm CDT on Sept. 21 with sustained winds around 45 mph, according the National Hurricane Center, but had little impact on USGC refining operations.

US Gulf Coast cracking margins for WTI MEH averaged $5.14/b for the week ended Sept. 18, compared with the $4.94/b the week earlier, according to S&P Global Platts Analytics.

Packing nowhere near the punch of predecessors Hurricane Laura and Hurricane Sally, Beta was not seen shutting in any of the region's refining operations, even as some were still reeling from the impact of earlier storms.

Previous refinery outages have supported margins for USGC refiners, even as runs have returned. USGC refinery utilization rose to 72.8% of capacity for the week ended Sept. 11, up from 63.9% the week prior, according to the most recent Energy Information Administration data.

Hurricane Laura hit the western Louisiana coast hard. Destroyed power lines have slowed the repair and restart of Phillips 66's 260,000 b/d Westlake plant and Citgo's 418,000 b/d Lake Charles refinery. Phillips 66's plant is expected to restart in early December, while no restart timeline is given for Citgo's plant.

Phillips 66's other Louisiana refinery – the 255,600 b/d Alliance refinery in Belle Chasse – was shut as Hurricane Sally targeted the New Orleans area. Phillips 66 said it would keep the plant shut and begin planned work at the plant originally scheduled for October providing no further details on scope and duration of the work.

USGC planned and unplanned refinery outages are estimated to average around 2.1 million b/d for the remainder of September, Platts Analytics forecasts.

Crude slate shifts

But some Gulf of Mexico oil and gas production was affected as platforms and rigs were shut in anticipation of Beta, at the same time some production shut by Laura and Sally were coming back online.

All told, 23 platforms were evacuated as of Sept. 21, according to government statistics, with 154,604 b/d or 8.36% of Gulf of Mexico oil production offline. Shell's 100,000 b/d Perdido platform accounted for most of the outage.

Shell also said it stopped drilling on the Mars platform. Nevertheless, USGC coking margins have risen because crude prices have fallen despite the production drop.

Mars USGC coking margins averaged $3.28/b for the week ended Sept. 18, compared with the $2.59/b the week earlier. Record high ULSD stocks and weak export markets have kept a lid on margins.

ULSD exports fell by almost half during this time period to 339,000 b/d from 763,000 b/d, according to Kpler commodity flow tracking data. This helped rive USGC ULSD stocks higher to 55.3 million barrels, EIA data showed.

Still, tighter regional gasoline stocks supported an increase in cracking margins for USGC benchmark Light Louisiana Sweet to $4.08/b for the week ended Sept. 18, up from the $3.85/b the week earlier.

Beta's landfall – halfway between Houston and Corpus Christi – gave shippers hope as the US Coast Guard is assessing the situation to lift shipping restrictions and reopen ports shut down as a precaution ahead of Beta.

Plans are for the Upper Houston Ship Channel to reopen the morning of Sept. 22 and the likelihood of Freeport reopening soon, according to shipper notes, as no new storms are on the horizon.