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REFINERY MARGIN TRACKER: USGC, USWC refinery margins strengthen ahead of OPEC + pact

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REFINERY MARGIN TRACKER: USGC, USWC refinery margins strengthen ahead of OPEC + pact

Highlights

Light-heavy crude spreads expected to widen

Crude prices initially down on OPEC+ agreement

Increased OPEC+ output to lag demand

US refinery margins for the week ended July 16 rose despite higher crude prices, trumped by growing demand for refined products and reduced supply due to unplanned refinery outages, according to a July 19 analysis from S&P Global Platts.

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A rise in unplanned US refinery outages helped balance US crude supply with demand for the week ended July 16, when 3.16 million b/d was offline, according to S&P Global Platts Analytics. However, downtime for the week ended July 23 is expected to fall off to about 3 million b/d, increasing the pull on crude supply.

While the initial market reaction to the July 18 agreement reached by OPEC+ softened crude futures prices as the group, which includes Russia, pledged to increase July and August output by 1.5 million b/d, weaker crude prices are not expected to be long-lived.

"Surging summer demand and OPEC+ restraint, short-term fundamentals remain tight," according to a research note from S&P Global Platts Analytics about crude supply and demand scenario.

Some analysts, like Credit-Suisse, raised their price outlooks for 2021, putting Brent at about $70/b, up from $66.50/b previously. For WTI, Credit-Suisse raised their price forecast to about $67/b from about $62/b.

Credit-Suisse analyst Manav Gupta said increased supply from OPEC+ is not enough to meet increased demand. "Even with projected supply increases, we have global crude inventory drawing by [about] 1.2 [million] b/d in 3Q 21 and [about] 1.5 [million] b/d in 4Q21," he wrote.

USGC, USWC benefit from more heavy barrels

In the US, coker-heavy, waterborne refineries dotting the US Gulf Coast and US West Coast will benefit the most from increased access to heavy barrels, as the light-heavy spread is expected to widen back out.

So far, the third quarter Brent-Basrah Light spread is averaging $1.27/b, while the Brent-Maya spread is averaging $5.23/b, according to Platts figures. This compares with the second quarter's $2.35/b and $6.11/b, respectively.

Recently, USWC crude imports have been heavily skewed toward Latin American grades, buttressed by some crudes from Nigeria, Russia and Eastern Canada, with lower-than-usual volumes from traditional OPEC suppliers like Saudi Arabia and Iraq.

USWC coking margins for Arab Light averaged $21.07/b for the week ended July 16, while Vasconia coking margins averaged $24.17/b, according to margin data from Platts Analytics.

Distillate cracks rose over $1/b week on week, with the Los Angeles CARBOB ULSD-Alaska North Slope averaging $14.40/b for the week ended July 16, with the Los Angeles jet-ANS crack averaging $8.85/b, supported by refinery outages, according to Platts assessments.

On the US West Coast, Marathon Petroleum's 363,000 b/d Los Angeles refinery, Valero's 85,000 b/d Wilmington plant, and Chevron's 269,000 b/d El Segundo facility all reported operating problems, which played a part in reducing weekly regional crude imports to 128,000 b/d from 171,000 b/d imported in the week ended July 9.

On the US Gulf Coast, coking margins for Basrah Light averaged $9.79/b for the week ended July 16, while the coking margin for Mexico's Maya averaged $11.22/b.

Distillate cracks also strengthened, with the jet-Light Louisiana Sweet crack up about a $1/b week on week to $6.09/b, while the ULSD-LLS crack rose over $1/b to $14.11/b.

US Atlantic Coast Refining Margin Averages ($/b)

Bonny Light Cracking

Arab Light Cracking

Bakken Crude Cracking

Forties Cracking

Week ending July 16

11.78

9.75

8.86

10.34

Week ending July 09

10.68

8.85

7.86

8.92

Q3 to date

11.06

9.19

8.18

9.41

Q3-20

3.63

2.01

3.77

3.59

Q2-21

11.70

9.66

10.17

10.58

Q1-21

7.69

6.63

6.13

6.49

Source: S&P Global Platts Analytics

US Gulf Coast Refining Margin Averages ($/b)

Arab Light Cracking

WTI MEH Cracking

LLS Cracking

Mars Coking

Week ending July 16

11.16

13.62

12.69

12.91

Week ending July 09

10.04

12.22

11.27

11.80

Q3 to date

10.42

12.64

11.70

12.11

Q3-20

1.68

5.26

4.40

3.01

Q2-21

10.15

13.09

11.76

11.49

Q1-21

7.74

10.50

9.43

8.71

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 July 16

14.80

13.16

17.87

16.00

Week ending July 09

13.39

11.36

15.77

14.56

Q3 to date

13.84

11.93

16.44

15.03

Q3-20

5.81

4.41

5.76

4.33

Q2-21

16.68

14.77

18.05

15.84

Q1-21

10.76

9.32

11.04

9.08

Source: S&P Global Platts Analytics

US West Coast Refining Margin Averages ($/b)

ANS Cracking

Vasconia Coking

Arab Medium Coking

Napo Coking

Week ending July 16

16.88

24.17

18.16

19.25

Week ending July 09

15.79

22.93

17.13

17.45

Q3 to date

16.24

23.40

17.47

17.93

Q3-20

9.83

10.99

8.07

9.63

Q2-21

16.88

22.12

18.10

17.33

Q1-21

13.02

16.62

13.87

12.62

Source: S&P Global Platts Analytics

Singapore Refining Margin Averages ($/b)

Dubai Cracking

Arab Light Cracking

ESPO Cracking

Arab Light Coking

Week ending July 16

-0.82

-1.84

1.53

-1.25

Week ending July 09

-0.71

-1.80

1.54

-1.21

Q1 to date

-0.82

-1.90

1.44

-1.35

Q3-20

-2.06

-2.27

-1.24

-2.62

Q2-21

-1.14

-2.15

0.69

-1.90

Q1-21

-0.83

-1.02

0.97

-1.02

Source: S&P Global Platts Analytics

ARA Refining Margin Averages ($/b)

WTI MEH Cracking

Bonny Light Cracking

Arab Light Cracking

Urals Cracking

Week ending July 16

4.53

6.17

3.70

5.45

Week ending July 09

3.54

5.42

2.73

4.86

Q3 to date

3.75

5.58

3.04

4.84

Q3-20

0.40

1.68

-0.72

0.68

Q2-21

4.24

5.37

3.01

4.59

Q1-21

2.34

3.75

1.08

3.25

Source: S&P Global Platts Analytics

Italy Refining Margin Averages ($/b)

Urals Cracking

CPC Blend Cracking

Arab Light Cracking

WTI MEH Cracking

Week ending July 16

5.96

6.81

2.62

3.47

Week ending July 09

5.05

6.04

1.51

2.35

Q3 to date

5.11

6.17

1.84

2.56

Q3-20

0.45

2.34

-1.60

-0.06

Q2-21

3.84

5.70

1.31

2.38

Q1-21

3.09

4.39

-0.14

0.84

Source: S&P Global Platts Analytics