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REFINERY MARGIN TRACKER: US refinery margins slip as Colonial Pipeline flows

Highlights

5 mil barrels of gasoline in secondary storage

Long Memorial Day weekend looms

Retail gasoline prices drop

US refining margins slipped lower as the Colonial Pipeline returned to service after a May 7 closure on a ransomware attack amid expectations that gasoline demand will decrease for the week ended May 21, according to a May 24 analysis from S&P Global Platts.

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Gasoline demand has been rising, 2.42 million b/d from 2020 when the coronavirus pandemic lockdowns were in full force, with many refiners noting that gasoline demand is over 90% of 2019 levels.

Weekly data from the Energy Information Administration puts gasoline demand for the week ended May 14 up 424,000 b/d week on week to 9.224 million b/d.

Higher demand is due in part to an increase of gasoline into secondary and tertiary storage as the pipeline ramped up over the week, some analysts said.

"Demand last week was surprisingly strong as drivers are estimated to have hoarded roughly 5 million barrels of gasoline in response to the temporary closure of the Colonial Pipeline following a ransomware attack," said S&P Global Platts Analytics in a research note.

"We believe that underlying demand last week was closer to 8.86 million b/d with the remainder of the barrels going into consumer inventories," they added.

"With the flow of gasoline and diesel from the USGC to USAC in recovery mode, crack spreads weakened and trimmed margins," according to Platts Analytics.

"Although this should lower demand this week, there will be an offset as refiners work to replenish depleted secondary storage. Net net, we expect demand to average 8.9 million b/d for the week ending May 21," the note said.

Margins slip lower

On the US Atlantic Coast, cracking margins for Bonny Light averaged $13.21/b for the week ended May 21, down from the $13.50/b the week earlier, Platts Analytics margin data showed, with a drop off at week's end to $13.11/b on May 21.

Weekly NWE cracking margins for Bonny Light averaged $5.73/b for the week ended May 21, up from the $5.69/b the week earlier. However, by end week margins had weakened to $5.69/b on May 21 compared with the $5.91/b reached on May 19 as NWE demand for USAC gasoline was supplanted by barrels from USGC refineries.

USGC cracking margins also showed a lower trend, as both gasoline and diesel inventories rose for the week ended May 14, EIA data showed. USGC WTI MEH cracking margins averaged $14.11/b for the week ended May 21, compared with $14.33/b for the week ended May 14.

In the Midwest, cracking margins also dropped with WTI ex-Cushing averaging $16.19/b for the week ended May 21, compared with the $17.28/b the week earlier. This is despite a crude inventory build at Cushing and product draws for the week ended May 14, EIA data showed.

Only the US West Coast showed an upward trend, with ANS cracking margins averaging $17.72/b for the week ended May 21, compared with $17.59/b for the week ended May 14. This was due in part to some refinery issues, including a problem with the alkylation unit at Chevron's El Segundo, California, refinery.

Memorial Day weekend ahead

With restart of the Colonial Pipeline, and the retail price of gasoline dropping, more drivers are expected to take to the road for the three-day Memorial Day weekend ahead, likely a harbinger for a strong summer gasoline demand.

"The AAA Gas prices website shows the national average at $3.03/gal, a penny less than a week ago," according to a May 24 statement from American Automobile Association, or AAA.

For the Memorial Day weekend – the traditional kick-off to the summer driving season – AAA forecasts that 37.1 million travelers will travel more than 50 miles from home, with 34.4 million driving. This is up 60% from 2020 but down 13.3% from 2019 levels.

Going forward, gasoline demand is expected to strengthen further, according to AAA data.

"AAA's travel department is seeing higher prices, limited availability and strong reservations for summer, later this year, into 2022 and even into 2023 with so-called revenge travel front of mind for those inflamed with wanderlust after being cooped up for more than a year," said Robert Sinclair, head of AAA public relations for the Northeast region.

US Atlantic Coast Refining Margin Averages ($/b)

Bonny Light Cracking

Arab Light Cracking

Bakken Crude Cracking

Forties Cracking

Week ending May 21

13.21

10.36

12.47

11.35

Week ending May 14

13.50

11.08

12.16

11.42

Q2 to date

11.44

9.60

10.05

10.21

Q2-20

2.92

4.46

1.66

3.13

Q1-21

7.38

6.52

5.95

6.21

Q4-20

4.18

3.66

3.46

4.31

Source: S&P Global Platts Analytics

US Gulf Coast Refining Margin Averages ($/b)

Arab Light Cracking

Basrah Light Cracking

LLS Cracking

Mars Coking

Week ending May 21

10.74

4.41

12.49

12.38

Week ending May 14

11.17

5.06

13.05

12.52

Q2 to date

10.49

4.72

12.18

11.75

Q2-20

3.20

-4.09

3.65

2.40

Q1-21

7.66

2.20

9.32

8.64

Q4-20

3.30

-0.15

5.36

4.16

Source: S&P Global Platts Analytics

US Midwest Refining Margin Averages ($/b)

Bakken Cracking

WTI Cushing Cracking

Syncrude Cracking

WCS ex-Cushing Coking

Week ending May 21

18.67

16.19

19.62

17.25

Week ending May 14

18.87

17.28

20.53

17.83

Q2 to date

17.11

15.78

18.15

16.05

Q2-20

3.54

3.13

3.86

2.65

Q1-21

10.69

9.31

10.96

9.10

Q4-20

6.48

4.43

7.53

4.20

Source: S&P Global Platts Analytics

US West Coast Refining Margin Averages ($/b)

ANS Cracking

Vasconia Coking

Arab Medium Coking

Napo Coking

Week ending May 21

17.72

22.91

19.37

18.65

Week ending May 14

17.59

21.91

19.36

17.54

Q2 to date

16.76

20.54

18.45

16.20

Q2-20

8.39

7.04

9.30

8.42

Q1-21

13.00

16.02

13.87

12.21

Q4-20

10.00

11.59

9.53

9.39

Source: S&P Global Platts Analytics

Singapore Refining Margin Averages ($/b)

Dubai Cracking

Arab Light Cracking

ESPO Cracking

Arab Light Coking

Week ending May 21

-1.39

-2.42

0.08

-1.86

Week ending May 14

-0.86

-2.05

1.31

-1.78

Q1 to date

-0.98

-1.99

1.26

-1.85

Q2-20

-2.51

3.13

-3.35

2.98

Q1-21

-0.99

-1.19

0.97

-1.19

Q4-20

-1.07

-0.45

-1.14

-0.57

Source: S&P Global Platts Analytics

ARA Refining Margin Averages ($/b)

WTI MEH Cracking

Bonny Light Cracking

Arab Light Cracking

Urals Cracking

Week ending May 21

4.33

5.73

3.41

4.50

Week ending May 14

4.49

5.69

3.27

4.25

Q2 to date

3.89

5.08

2.45

4.64

Q2-20

-1.28

1.19

4.80

0.46

Q1-21

1.46

3.23

0.67

2.83

Q4-20

0.91

1.68

0.38

0.91

Source: S&P Global Platts Analytics

Italy Refining Margin Averages ($/b)

Urals Cracking

CPC Blend Cracking

Arab Light Cracking

WTI MEH Cracking

Week ending May 21

3.29

5.56

1.58

2.86

Week ending May 14

3.41

6.07

1.72

3.31

Q2 to date

3.86

5.84

0.89

2.71

Q2-20

-1.31

3.01

2.95

-2.98

Q1-21

2.82

4.12

-0.42

0.81

Q4-20

1.14

2.81

-0.18

0.62

Source: S&P Global Platts Analytics