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Fires, outages and storms boost US refining margins

Highlights

Hurricane Ian first threat of season to USGC oil operations

BP's Midwest refinery woes push up margins

USWC refinery margins spike as planned work begins

  • Author
  • Janet McGurty    Anna Trier
  • Editor
  • Benjamin Morse
  • Commodity
  • Agriculture Energy Transition Oil Petrochemicals Shipping
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  • United States

US refining margins ticked up across the nation following a spate of unplanned refining fiascos, the beginning of seasonal turnarounds, and a pick-up in Atlantic Basin storm activity which could threaten US Gulf Coast refinery output, an analysis from S&P Global Commodity Insights showed on Sept. 26.

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Seasonal turnarounds underway have increased US refinery downtime, exacerbated by unplanned downtime at plants particularly on the US West Coast and Midwest. S&P Global Commodity Insights expect total US refinery runs to drop to 16.19 million b/d for the week ended Sept. 23 from the 16.36 million b/d for the week ended Sept. 16 reported in most recent weekly Energy Information Administration data.

"Refinery snags in some areas of the country are contributing to wild fluctuations as areas of the West Coast, Pacific Northwest, Great Lakes and Plains have seen significant refinery issues leading to supply challenges, causing prices to spike even as oil prices have dropped," said Patrick De Haan, analyst with GasBuddy, which tracks gasoline and diesel retail data across the US.

BP's Midwest refinery woes

A Sept. 20 fire at the BP-Husky refinery in 150,800 b/d Toledo, Ohio, which claimed two lives, also shut down the plant, while BP also appears to be struggling to get a gasoline-making fluid catalytic cracking unit back online at its massive 435,000 b/d Whiting, Indiana, refinery after an Aug. 24 fire took offline several units, including two crude units and reformer.

For the week ended Sept. 23, Platts assessed Chicago CBOB at $2.89/gal, up from the $2.58/gal a week earlier.

RIN-less Midwest cracking margins for Canada's Syncrude averaged $28.16/b for the week ended Sept. 23, compared with the $14.83/b the week earlier. And Western Canada Select coking margins without RINs averaged $44.05/b for the week ended Sept. 23, compared with the $32.71/b the week earlier.

RINs are credits bought by obligated parties like refiners to meet their Environmental Protection Agency's mandated renewable fuel standard.

US West Coast margins support by planned and unplanned work

Planned work at US West Coast refineries is underway, with Phillips 66 and Valero taking offline their Anacortes, Washington, and Benicia, California, refineries for scheduled maintenance.

However, problems at several Los Angeles-area refineries forced some refiners to shut down some units for unplanned work.

Phillips 66 shut a reformer at its 139,000 b/d Wilmington, California, refinery in mid-September while flaring at Marathon's 363,000 b/d Carson, California, is ongoing, pushing the price of CARBOB to an average of $4.12/gal for the week ended Sept. 23, according to Platts assessments. For the week ended Sept. 16, CARBOB averaged $3.54/gal.

RINs-adjusted cracking margins for Alaska North Slope averaged $53.91/b for the week ended Sept. 23, compared with the $37.11/b for the week earlier.

Hurricane season makes a late appearance

There has been a dearth of hurricanes in 2022, despite forecasts by the National Hurricane Center for a busier-than-normal season. However, Hurricane Ian, currently moving westward across Cuba, could be the first to present a threat to US Gulf Coast oil and gas infrastructure.

"Rapid strengthening is expected during the next day or so, and Ian is forecast to become a major hurricane tonight or early Tuesday when it is near western Cuba and remain a major hurricane over the southeastern Gulf of Mexico on Wednesday," said the National Hurricane Center's 11 am EDT Sept. 26 statement.

Currently Ian is a Category One Hurricane with winds of 80 miles per hour, according to the NHC. In the Gulf of Mexico producing areas, Chevron said in a Sept. 26 email it was evacuating personnel and shutting in its Petronius and Blind Faith platforms ahead of the storm. The company said it was also "paying close attention to the track and forecast" of Ian at its 346,440 b/d Pascagoula, Mississippi, refinery.

Earlier, GasBuddy's Patrick De Haan said their data shows that 97% of Florida's gas stations have fuel. However, the US Coast Guard has declared Port Condition Yankee for the port of Tampa, limiting access for supply of gasoline from USGC refineries to be blended in region's blending centers.

About 11.3 million barrels or about 376,433 b/d of motor gasoline blending components, primarily CBOB, travelled via barge and tanker from the USGC to the lower USAC in June 2022, according to most recent EIA data.

One shipper familiar with the situation said the impact on gasoline blending would depend on the extent of flooding and disruption to power supply.

"If I had to guess right now, I would estimate five to seven days of limited service, with gradual restoration of full capacity during the first two weeks of October," he said.