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REFINERY MARGIN TRACKER: US refinery margins inch higher as refiners cautiously increase rates

Highlights

Slow, steady transportation fuel growth demand supports higher margins

Refiners mindful on ramping up rates to keep margins healthy

New York — US refinery margins are starting to rebound as states begin to reopen and demand for exports picks up, but refiners are treading carefully when increasing rates so as not to overwhelm the green shoots of recovery with oversupply, an analysis from S&P Global Platts showed June 22.

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As drivers return to the road, truck traffic inches higher and air traffic picks up, so does demand for transportation fuels like gasoline, jet and ULSD.

Refinery utilization averaged 73.8% for the week ended June 12, according to the most recent US Energy Information Administration data, up slightly from 73.1% the week earlier.

On the US Gulf Coast, home to the some of the world's most sophisticated plants, refinery utilization jumped 1.2 percentage points week on week to 79% for the week ended June 12, EIA data showed, and margins have rose in line with stronger demand.

USGC cracking margins for local WTI-MEH crude averaged $6.01/b for the week ended June 19, up from the $4.34/b the week earlier, according to margin data from S&P Global Platts Analytics. USGC coking margins also gained, with Mars coking margins averaging $4.26/b, up from $2.65/b.

The export market from the USGC to Latin America is also showing steady gains. USGC exports of gasoline and naphtha averaged 403,000 b/d for the week ended June 19, compared with the four-week moving average of 315,000 b/d, according to Kpler data. Kpler data shows a majority of these barrels are going to Mexico and Latin America.

USGC distillate exports are also up, averaging 633,000 b/d for the week ended June 19, compared with the 526,000 b/d the week earlier, Kpler data shows, again with most barrels heading south.

US demand moves higher

US gasoline demand continues to climb as states loosen lockdown restrictions put in place to prevent the spread of coronavirus. For the US as a whole, driving is up 46% from the January 13 baseline, according to Apple Mobility data.

Driving is up 19% in California, Apple Mobility data shows, which is supporting higher gasoline prices. Los Angeles CARBOB 84 rose almost 10 cents/ gal week on week to reach $1.3866/gal for week ended June 19, Platts price assessments showed.

USWC cracking margins have reflected higher demand. The ANS cracking margin broke through double digits to average $10.13/b for the week ended June 19, compared with the $9.39/b the week earlier.

Diesel demand is also growing as more trucks are on the road. According to Cass Freight Index, which measures monthly freight activity, shipments picked up 1.6% in May from April, although they still lagged May 2019 shipments by 23.6%.

The uptick in freight combined with the reopening of manufacturing facilities has supported stronger coking margins.

In the Midwest, the WCS coking margin averaged $7.94/b for the week ended June 19, compared with $5.22/b the week earlier.

Travelers are also returning to the sky as airlines rethink their business models to address health concerns. But with the airline sector slower to show a rebound compared with other transportation methods, jet demand continues to lag other fuels.

On June 21, TSA data showed the number of travelers screened at US airports rose to 590,456, up from 318,449 on May 21 but still well below the 2.72 million travelers on the same day in 2019.

But as travelers are starting to return, airlines are preparing meet demand.

Delta Air Lines said will restart service between Seattle and Shanghai-Pudong via Seoul-Incheon on June 25 twice per week, and will operate weekly flights from Seattle and Detroit, also via Incheon.

Delta will cap plane capacities 60%-70% and change other flight amenities, such as seating configurations, food service delivery and luggage storage requirements.

US Atlantic Coast Refining Margin Averages ($/b)

Bonny Light Cracking

Arab Light Cracking

Bakken Crude Cracking

Forties Cracking

Week ending June 19

5.01

3.48

4.35

4.61

Week ending June 12

2.91

1.96

2.84

2.89

Q2 to date

2.79

4.70

1.35

3.07

Q2-19

7.11

5.03

13.87

7.08

Q1-20

2.56

2.12

8.10

2.86

Q4-19

7.06

2.57

13.13

5.23

Source: S&P Global Platts Analytics

US Gulf Coast Refining Margin Averages ($/b)

WTI MEH Cracking

Basrah Light Coking

LLS Cracking

Mars Coking

Week ending June 19

6.01

0.85

5.47

4.26

Week ending June 12

4.34

-0.74

3.58

2.65

Q2 to date

4.04

-1.61

3.53

2.32

Q2-19

9.21

3.61

9.70

7.99

Q1-20

8.17

0.96

8.31

7.17

Q4-19

11.27

3.65

10.99

9.30

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 June 19

7.90

5.91

9.46

7.04

Week ending June 12

6.79

3.91

6.68

5.22

Q2 to date

2.87

2.70

2.90

2.08

Q2-19

18.13

16.83

17.59

17.65

Q1-20

9.27

6.79

7.53

8.02

Q4-19

12.32

11.19

12.04

12.21

Source: S&P Global Platts Analytics

US West Coast Refining Margin Averages ($/b)

ANS Cracking

Vasconia Coking

Arab Medium Coking

Napo Coking

Week ending June 19

10.13

13.54

11.62

13.10

Week ending June 12

9.39

12.04

10.23

11.80

Q2 to date

8.43

6.48

9.31

8.29

Q2-19

16.69

21.26

15.98

19.81

Q1-20

14.28

14.19

14.46

16.12

Q4-19

17.62

22.22

18.88

20.59

Source: S&P Global Platts Analytics

Singapore Refining Margin Averages ($/b)

Dubai Cracking

Arab Light Cracking

ESPO Cracking

WTI MEH Cracking

Week ending June 19

-1.96

4.59

-1.73

-0.17

Week ending June 12

-2.99

3.37

-3.37

-1.62

Q1 to date

-2.58

2.92

-3.53

-3.21

Q2-19

0.64

-1.03

0.42

1.90

Q1-20

-0.93

-3.86

0.09

1.58

Q4-19

-0.38

-2.45

1.02

3.56

Source: S&P Global Platts Analytics

ARA Refining Margin Averages ($/b)

WTI MEH Cracking

Bonny Light Cracking

Arab Light Cracking

Urals Cracking

Week ending June 19

1.14

2.62

2.68

-0.17

Week ending June 12

-0.19

1.07

1.61

-1.32

Q2 to date

-1.61

1.05

5.01

0.58

Q2-19

7.15

6.23

4.94

6.17

Q1-20

1.26

2.36

3.23

5.28

Q4-19

5.96

6.32

3.94

5.89

Source: S&P Global Platts Analytics

Italy Refining Margin Averages ($/b)

Urals Cracking

CPC Blend Cracking

Arab Light Cracking

WTI MEH Cracking

Week ending June 19

-0.83

2.55

2.84

0.80

Week ending June 12

-2.19

0.98

1.53

-0.71

Q2 to date

-1.34

3.10

2.92

-3.49

Q2-19

4.01

6.54

2.97

5.29

Q1-20

4.40

6.00

1.92

0.03

Q4-19

3.76

7.13

2.17

4.39

Source: S&P Global Platts Analytics