REFINERY MARGIN TRACKER: Global refinery runs seen down 14 million b/d this week on coronavirus pandemic

New York — Global refiners entered the second quarter with expectations of lower runs to balance product supply with demand as many margins slip into negative territory as the coronavirus pandemic continues to spread throughout the world, an analysis from S&P Global Platts showed Monday.

"The coronavirus (COVID-19) is wreaking havoc with the refining industry," according a recent report by S&P Global Platts Analytics.

"With demand collapsing, we anticipate that overall downtime will approach 14 million b/d of turnarounds this week, due to idling of units and run cuts," the report said, referring to the week ended April 10.

Overall, Platts Analytics expects second quarter runs to be 10 million b/d lower in 2020 than in 2019.

Global refining margins are mixed and often dependent on location and refinery configuration. Currently, Platts Analytics calculates that split between coronavirus-related run cuts and regular maintenance is 45% and 55%, respectively.

"Yet, in coming days and weeks, as lockdowns are enforced across the globe, COVID-19 outages will increase significantly as planned maintenance will be postponed," said the report.

Planned refinery maintenance is being pushed back as refiners fear contagion of COVID-19 in their plants from contractors brought in to assist planned work.

Parkland Fuel said Monday the return to service of its Burnaby, British Columbia, plant will be in two weeks, later than anticipated, as the company was forced to adjust its turnaround procedure to ensure more stringent safe practices to prevent coronavirus contagion.

Cutting runs to match falling demand

Instead, refiners are cutting runs for economic reasons to more match output with demand.

In the US alone, Platts Analytics expects that 2.25 million b/d of US run cuts will occur in early April as demand continues to drop.

US oil product demand fell 1.55 million b/d in the week ended March 27 to 17.85 million b/d, Energy Information Administration data showed.

Total US exports of refined products also dropped 333,000 b/d in the same period to reach 5.30 million b/d. However, distillates exports increased by 243,000 b/d for the week ended March 27 to 1.5 million b/d as demand for bunker fuel and ULSD continued to hold up better than that for gasoline.

USGC refiners positive, USWC hurt by stay-at-home orders

USGC refiners running Light Louisiana Sweet, which has a high distillate cut, realized a $6.44/b coking margin and a $6.70/b cracking margin for the week ended April 3, Platts Analytics margin data showed, compared to the $11.29/b and $11.26/b seen the week earlier.

Platts Analytics forecasts that USGC refiners will have 1.49 million b/d offline the week ended April 10, compared with the 1.25 million b/d offline the week ended April 3.

Margins for West Coast refiners were more dismal as stay-at-home orders blanket most of the region. Cracking margins for benchmark Alaska North Slope fell to minus $2.38/b for the week ended April 3, compared with the minus 19 cents/b the week earlier. ANS coking margins averaged minus $4.20/b compared with the minus $1.85/b during the same time frame.

Platts Analytics forecasts that USWC refiners will have 876,000 b/d offline for the week ended April 10, compared with the 818,000 b/d offline for the week ended April 3.

Midwest refiners make deeper run cuts, USAC also cuts a bit more

Midwest refiners continued to suffer from lack of export capacity. Midwest cracking margins for WTI ex Cushing averaged minus $6.19/b for the week ended April 3, compared with the minus 82 cents/b the week earlier. Platts Analytics forecasts that 678,000 b/d will be taken offline for the week ended April 10 compared with the 578,000 b/d the week earlier.

On the US Atlantic Coast, margins were mostly positive, with Bakken cracking margins holding relatively steady at $7.10/b for the week ended April 3 compared to the $7.17/b the week ended March 27.

Platts Analytics expects USAC refiners to cut an additional 40,000 b/d in runs for the week ended April 10, making a total of 980,000 b/d offline for the week.

Europe outages to remain at record highs

Platts Analytics notes that European refining outages are expected to lessen slightly in the week ended April 10 to 1.8 million b/d compared with the record high level of 2.2 million b/d in the week ended March 27. They attribute as much as 50% of downtime, or about 600,000 b/d can "be linked to product containment issues."

NWE cracking margins for Arab Light held steady at $5.01/b for the week ended April 3, in line with the $5/b the week ended March 27. In the Mediterranean, refining margins for CPC Blend averaged $7.91/b for the week ended April 3, compared with the $10.21/b the week earlier.

Asian plants run cuts could lessen

Singapore cracking margins for the week ended April 3 for benchmark Dubai averaged minus $3.33/b compared with the minus $1.92/b the week earlier.

Platts Analytics calculated that 3.6 million b/d of refinery capacity was offline the week ended April 3, with expectations that 3.3 million b/d of refinery capacity will be offline the week ended April 10.

However, market sources have said that several refiners, including Caltex Australia and PetroVietnam, have not yet implemented plans for run cuts which have not been factored into this week's run cuts.