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Refinery margin tracker: Global refining margins take a severe hit on falling gasoline demand

Highlights

Atlantic Basin refiners cutting runs

USGC margins stay positive

Asian margins picking up but China slow to recover

New York — Refining margins are turning negative on the drop in gasoline demand and global refiners began to cut runs to meet the lower demand and delayed planned work to manage the spread of COVID-19, an analysis from S&P Global Platts showed Monday.

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Atlantic Basin refiners announced run cuts as some margins dipped into negative territory, a result of the sharp fall-off in gasoline demand resulting from widespread stay-at-home mandates keeping drivers off the road.

"Refining margins are a simple mathematical calculation. Without outlet for products, it doesn't matter if [they are] positive or negative," said Sergio Baron, a consultant with S&P Global Platts Analytics.

For the week ended March 20, USAC cracking margins for Cabinda and Saharan Blend were negative at minus 85 cents/b and minus 41 cents/b, respectively, according to margin data from S&P Global Platts Analytics.

Margins for other crudes were positive, but just barely, and with the NYMEX front-month RBOB versus front-month NYMEX crack settling at minus $6.06/b Monday, it gave the signal for refiners to start to cut gasoline output.

On the US Atlantic Coast, Phillips 66 cut rates at its 258,000 b/d Bayway refinery in Linden, New Jersey, by as much as 20% while to the south Delta Air Lines' 190,000 b/d Trainer, Pennsylvania, refinery began running at 150,000 b/d this weekend.

Nearby, at PBF's 180,200 b/d Delaware City, Delaware, plant the company shifted the product yield to maximum distillate yield to cut back on gasoline output.

EUROPEAN RUN CUTS, MAINTENANCE EXTENSIONS

European refiners also reported they were cutting rates on lack of demand and falling margins.

NWE cracking margins for Arab Light averaged minus 32 cents/b for the week ended March 20, compared with the 99 cents/b for the week ended March 13, Platts Analytics data shows..

ExxonMobil's French downstream subsidiary Esso SAF said Monday that throughput at its two French refineries, Gravenchon and Fos, has been reduced "to adapt to the decreasing French demand during the COVID-19 pandemic."

Other European refiners are delaying planned work in an effort to slow the spread of the coronavirus.

Finland's Neste said Monday that its planned major maintenance at the Porvoo refinery will be delayed and only "the most business critical maintenance works and regulatory inspections" will be carried out between April and June. The originally planned turnaround will be completed in 2021.

However, refinery margins for Mediterranean refiners are weakening further into negative territory as Italy is one of the hardest countries by the coronavirus, with some regional refineries running around 20% to 30%, traders said.

Italian refining margins for Arab Light fell to minus $1.48/b for the week ended March 20, compared with the 10 cent/b margin the week earlier, Platts Analytics data showed.

USGC MARGINS COULD BE IMPACTED BY REDUCE VOLUMES TO USAC, EXPORTS

US Gulf Coast refiners have been able to maintain better margins, as their complex refineries are able to process a wider variety of crude and have higher distillate yields than USAC plants.

USGC cracking margins for WTI MEH averaged $4.99/b for the week ended March 20, down from the $8.33/b the week earlier, Platts Analytics margin data showed.

USGC coking margins maintained their levels. Coking margins for Maya averaged $8.49/b for the week ended March 20 compared with the $8.46/b the week earlier.

The strength in coking found support from front-month NYMEX ULSD cracks, which has been holding up better than those of RBOB. Front-month NYMEX ULSD cracks against the NYMEX light, sweet contract settled at $19.32/b Monday, compared Friday's $19.83/b settle.

However, USGC refinery margins are underpinned by a strong export presence. And as demand starts to waver in countries like Mexico and South America, exports may start to decline, exacerbated by bad weather and fog closing ports sporadically.

USAC demand for USGC products is already taking a hit after Colonial Pipeline said it would reduce by 20% flows on its 1.37 million b/d gasoline line and 1.16 million b/d distillate Main Lines.

Colonial's two main lines begin at Houston-area refineries and end in Greensboro, North Carolina where feed Line 3, an 855,000 b/d mixed line carries gasoline, diesel and jet to full storage tanks in Linden, New Jersey, the pricing point for the NYMEX RBOB contract.

Not just weak demand, but fear of contagion at some plants is being factored into run rates. ExxonMobil was seen cutting rates by 70,000 b/d at its 502,500 b/d Baton Rouge, Louisiana, refinery after it said it was cutting back on contractors there while maintaining its commercial operations.

To the north, some Midwest margins have moved into negative territory, as falling demand is keeping barrels stranded in the region due to lack of outlet infrastructure.

Whiting has not cut back on any runs yet, refinery sources said, as coking margins for its two mainstay crudes -- Western Canada Select and Bakken -- stay positive.

The Midwest WCS coking margin fell to $1.69/b for the week ended March 20, from the $5.32/b the week earlier. The Bakken cracking margin dropped to 80 cents/b from $4.25/b during the same time period. However, the WTI Cushing cracking margin fell to minus $1.46/b for the week ended March 20, compared with the $1.02/b the week earlier.

USWC, ASIAN MARGINS STILL SUFFER AS CHINA SLOW TO RECOVER

"Chinese energy and economic metrics continue to improve, though the rate of improvement has been slow. It's clear the economic damage due to the two-month lockdown has been vast, although probably not structural," wrote S&P Global Platts Analytics in a recent report.

Chinese margins are showing signs of recovery as well. The Arab Light coking margin to China was minus $7.90/b for the week ended March 20, however, on Monday it rose to minus $5.69/b.

Singapore margins are still clinging to negative values, but some slight improvement is evident.

The Dubai cracking margin was minus 60 cents/b for the week ended March 20, up from minus $3.38/b the week earlier, Platts Analytics data shows.

On the USWC, margins dropped significantly week-on-week and could be pressured down further as stay-at-home mandates cut demand and planned work is completed at regional refineries.

Cracking margins for Alaska North Slope fell to $2.00/b for the week ended March 20 from $6.80/b the week earlier. Coking margins again fared better, with Napo coking margin averaging $5.66/b for the week ended March 20, compared with the $8.42/b the week ended March 13.

However, both Shell and Marathon filed with Washington State regulators that they were bringing back on line their plants there which could have a negative pressure on the region's margins.

US Atlantic Coast Refining Margin Averages ($/b)

Bonny Light Cracking

Arab Light Cracking

Bakken Crude Cracking

CPC Blend Cracking

Week ending March 20

0.59

3.54

2.02

2.23

Week ending March 13

-1.83

2.56

2.84

4.62

Q1 to date

2.75

1.56

8.82

7.32

Q1-19

4.54

3.01

9.12

8.58

Q4-19

7.10

2.63

13.16

10.11

Q3-19

8.89

5.00

14.34

12.02

Source: S&P Global Platts Analytics

US Gulf Coast Refining Margin Averages ($/b)

Arab Medium Coking

Maya Coking

Mars Coking

WCS ex-Nederland Coking

Week ending March 20

3.38

8.49

5.38

6.58

Week ending March 13

4.30

8.46

6.47

8.15

Q1 to date

4.41

7.63

6.88

10.04

Q1-19

3.08

5.52

6.53

8.52

Q4-19

6.25

9.87

9.25

13.60

Q3-19

5.93

8.47

9.27

13.54

Source: S&P Global Platts Analytics

US Midwest Refining Margin Averages ($/b)

Bakken Cracking

WTI Cushing Cracking

WCS ex-Cushing Coking

WTS Midland Coking

Week ending March 20

0.80

-1.46

1.69

-0.39

Week ending March 13

4.23

1.02

5.32

2.51

Q1 to date

10.24

7.64

8.58

5.62

Q1-19

15.18

14.61

12.46

13.67

Q4-19

12.34

11.22

12.25

8.85

Q3-19

14.86

13.38

14.23

13.04

Source: S&P Global Platts Analytics

US West Coast Refining Margin Averages ($/b)

ANS Cracking

Napo Coking

Arab Medium Coking

Arab Light Coking

Week ending March 20

2.00

6.08

5.66

4.04

Week ending March 13

6.80

9.94

8.42

7.29

Q1 to date

15.95

17.31

15.11

16.14

Q1-19

14.23

16.02

11.72

13.06

Q4-19

17.58

20.55

18.84

20.40

Q3-19

16.64

18.32

15.73

17.48

Source: S&P Global Platts Analytics

Singapore Refining Margin Averages ($/b)

Dubai Cracking

Arab Light Cracking

ESPO Cracking

WTI MEH Cracking

Week ending March 20

-0.60

-3.53

-2.35

1.07

Week ending March 13

-3.38

-6.29

-1.43

-2.81

Q1 to date

-0.85

-3.81

0.49

1.68

Q1-19

1.51

0.92

1.28

2.87

Q4-19

-0.38

-2.45

1.02

3.56

Q3-19

3.62

1.08

2.14

4.22

Source: S&P Global Platts Analytics

ARA Refining Margin Averages ($/b)

WTI MEH Cracking

Bonny Light Cracking

Arab Light Cracking

Urals Cracking

Week ending March 20

1.41

1.30

-0.32

5.34

Week ending March 13

-2.16

-1.86

0.99

5.32

Q1 to date

0.96

2.39

3.43

5.04

Q1-19

4.21

4.13

4.27

4.15

Q4-19

6.01

6.37

4.00

5.95

Q3-19

8.49

7.62

6.32

7.31

Source: S&P Global Platts Analytics

Italy Refining Margin Averages ($/b)

Urals Cracking

CPC Blend Cracking

Arab Light Cracking

WTI MEH Cracking

Week ending March 20

3.60

4.15

-1.48

0.00

Week ending March 13

4.29

5.34

0.10

-3.18

Q1 to date

4.32

5.97

2.17

-0.19

Q1-19

3.62

5.99

4.08

3.82

Q4-19

3.82

7.18

2.23

4.44

Q3-19

5.58

8.85

4.91

7.70

Source: S&P Global Platts Analytics