REFINERY NEWS ROUNDUP: US Midwest refinery margins fall as COVID-19 cases spike

New York — US refinery margins were generally higher for the week ended Oct. 9, except for Midwestern refiners where a rising coronavirus contagion has dampened demand, according to an analysis by S&P Global Platts Oct. 12.

While its weekly margins remain higher than those on the US Gulf Coast, US Midwest refining margins trended down last week, moving contrary to the rest of the US as regional cases of coronavirus continue to rise across the Midwest.

US Midwest coking margins for regional crudes like WTS Midland fell to $3.25/b for the week ended Oct. 9, compared with $5.08/b the week earlier, margin data from S&P Global Platts Analytics showed, while Midwest WTS cracking margins dropped to $2.13/b from $3.77/b a week earlier.

The 15% rise in US coronavirus cases to 44,333 over the past 14 days has been most heavily concentrated in the Midwest, data from Johns Hopkins Coronavirus Resource Center showed. In Chicago's Cook County, Illinois, confirmed coronavirus cases rose to 154,519 as of Oct. 11, from 146,200 cases on Oct. 1.

However, a recent report by Platts Analytics suggests that greater state and local control on containing infection hotspots is "sending an encouraging signal" by acting swiftly to shut down quickly, which could have less of an impact on demand than the first contagion wave.

"The shares of US counties experiencing large week-on-week increases has come down in the last few weeks," the report said.

"Indications are that hotspots are being contained based on past patterns," the report added.

Gasoline cracks fall on week

US Midwest gasoline cracks have been hit hard by the new spread of the coronavirus, particularly as Midwestern refinery rates have risen faster than the other regions. Overall US refinery utilization averaged 77.1% for the week ended Oct. 5, most recent Energy Information Administration data showed, while Midwest refinery runs averaged 86.2% in the same time period.

Chicago CBOB-WTI cracks averaged $7.51/b for the week ended Oct. 9, down from $10.88/b the week earlier, Platts assessment data showed, as gasoline stocks rose to 46.2 million barrels for the week ended Oct. 2.

Midwest WTI cracking for barrels ex-Cushing fell to $4.50/b for the week ended Oct. 9, compared with the $5.81/b the week earlier, and are likely to fall again as planned regional FCCU outages will taper off toward the end of the month from 903,000 b/d to 639,000 b/d, Platts Analytics forecasts.

Agricultural demand, cooler weather aid ULSD cracks

Midwest crude distillation capacity offline is coming back online as planned work ends from the 2.1 million b/d offline for the week ended Oct. 9 to 1.36 million b/d anticipated offline at the end of the month.

The harvest season is increasing agricultural demand for ULSD which in turn supported higher ULSD –WCS ex-Cushing cracks, which rose to $12.24/b for the week ended Oct. 9 from $11.02 the week earlier. However, higher crude costs, less-than-optimal market capture, and the increase in D6 RINs costs cut into margins, with the WCS coking margin falling to $4.81/b from $6.22/b in the same two week time period.

As the harvest winds down there is question mark on the pull from heating demand will have distillates especially last year's extremely mild weather. While the weather is turning cooler with the advent of fall, the winter in the US is expected to be "relatively mild," according to a recent Platts Analytics report.