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RBOB cracks rally as USGC refiners see extended outages

Highlights

Around 1.6 million b/d of USGC refinery capacity remains offline

Operators restart 2.7 million b/d; full ramp up could take weeks

BofA revises 2021 Brent forecast up $10 to $60/b

Gasoline cracks rebounded Feb. 23 as US refiners continued to operate at reduced capacity in the wake of last week's deep freeze.

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ICE New York Harbor RBOB crack versus Brent climbed to around $16.16/b in afternoon trading, up from a Feb. 22 close of $15.86/b.

Nearly 2.7 million b/d in refining capacity began restart activities this week, including North America's largest refinery, Motiva Enterprise's 607,000 b/d Port Arthur Refinery.

However, it may take weeks for these plants to return to their pre-storm capacities. Motiva's Port Arthur facility may not be fully operational though until March 11, according to an estimate in a new filing with the Texas Commission on Environmental Quality.

Total said Feb. 23 it is restarting its 225,000 b/d Port Arthur Refinery, but that the process could also drag out until mid-March, according to a new TCEQ filing.

Meanwhile, about 1.6 million b/d in refining output remained down on Feb. 23 without yet restarting, mostly in the Houston area. Some refineries remain only partially operational throughout Texas.

NYMEX March RBOB settled up 1.69 cents at $1.8586/gal and March ULSD climbed 94 points to $1.8680/gal.

Crude futures finished a volatile day mixed as the market searched for its next driver.

NYMEX April WTI settled down 3 cents at $61.67/b while ICE April Brent climbed 13 cents to settle at $65.37/b.

Brent crude prices will average $60/b in 2021, according to latest forecast from Bank of America Global Research released Feb. 23, with temporary price spikes above $70/b possible during the second half of the year. The figure marks an upward revision of $10/b from its previous forecast released in June 2020.

The bullish outlook was supported by advances in COVID-19 vaccine rollouts, OPEC+ supply discipline, and an easing of pandemic lockdowns, the bank said. The Texas deep freeze is likely to reduce global inventories by 50 million barrels, providing additional price support.

The newly bullish outlook helped arrest an early session slide, pulling prices off session lows tested in early US trading. But uncertainty surrounding the restart of US production shut in by recent severe weather capped the rally.

"The deep freeze will impact the US production for a couple of weeks, but if US production comes back a little quicker that could be what is needed to trigger a pullback for WTI crude," OANDA senior market analyst Edward Moya said in a note.

Still, crude forward structures turned more bullish. Year-ahead WTI futures settled at a $5.56/b discount to the front-month contract, while the one-year Brent spread widened to $5.62/b, marking the widest backwardation for both contracts since January 2020.

Texas power outages down USGC refining capacity
Company
Refinery
Capacity (b/d)
Confirmed down
LyondellBasell
Houston
263,776
Marathon
Galveston Bay
585,000
San Antonio
San Antonio
20,000
Shell
Deer Park
318,000
Valero
Houston
205,000
Valero
Port Arthur
335,000
Partial impact
Delek US
Big Spring
73,000
Delek US
Tyler
75,000
Marathon
El Paso
131,000
Phillips 66
Sweeny
265,000
Valero
Texas City
225,000
Valero
McKee
195,000
Restarting
Chevron
Pasadena
112,229
Citgo
Corpus Christi
167,500
ExxonMobil
Baytown
560,500
ExxonMobil
Beaumont
369,024
Flint Hills
Corpus Christi
338,500
Motiva
Port Arthur
607,000
Total
Port Arthur
225,500
Valero
Corpus Christi
290,000
Total
5,361,029
Sources: Companies, company filings