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REFINERY MARGIN TRACKER: Rising RIN costs take a big bite out of US margins

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REFINERY MARGIN TRACKER: Rising RIN costs take a big bite out of US margins

Highlights

Gasoline demand higher on Thanksgiving travel

Airports see most travelers since March

New York — US refining margins fell across the board in the week ending Nov. 20, pulled lower by weakening demand and exacerbated by the rise in Renewable Identification Numbers prices, an S&P Global Platts analysis showed Nov. 23.

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Gasoline demand has been declining as a resurgence of coronavirus cases are leading to partial shutdowns and lower personal mobility in many regions.

Lower gasoline demand means less ethanol is needed to blend to meet Renewable Fuel Standard mandates, and lower ethanol production means higher prices for RINs, credits refiners need to buy to meet their mandated annual Renewable Volume Obligation (RVO).

The rise in RIN prices has taken a greater chunk out of refining margins as refiners look to settle up their annual RVO as the year's end nears.

On the US Gulf Coast, cracking margins for WTI MEH averaged $5.52/b for the week ended Nov. 20, factoring in RIN costs of $2.54/b, according to S&P Global Platts Analytics margin data. This compares with Q4 2019 margins of $11.27/b, which included 81 cents/b for RINs.

'Biden bump'

RIN prices have been rising since the beginning of 2020 as the Trump Administration began to pull back on issuing small refinery exemptions. The US 10th Circuit Court of Appeals in January denied HollyFrontier a small refinery exemption, which put many of the exemptions issued over the past four years in jeopardy and turned RIN sellers into RIN buyers.

While HollyFrontier has requested the US Supreme Court review the decision, a Nov. 17 decision by the US 4th Circuit Court of Appeals that vacated a US Environmental Protection Agency decision to Ergon, operator of a small West Virginia refinery, is not expected to "change the landscape," according to S&P Global Platts Analytics, and RIN prices are expected to continue to rise.

"Right now we in the midst of a 'Biden bump' as D6 [ethanol] RIN prices have increased each day since Election Day (Nov. 3) on the belief that a Biden administration would result in stronger enforcement of biofuel mandates," said Corey Levinsky, biofuels analyst with Platts Analytics.

Gasoline demand up on holiday travel

The resurgence of the coronavirus has led to partial shutdowns in many regions. The Apple Mobility index continues to show declines in US driving, down 19% since September nationally, with northern regions seeing a 28% decline as coronavirus there cases rise. .

Gasoline demand, which fell by about 500,000 b/d to 8.26 million b/d for the week ended Nov. 13, according to most recent US Energy Information Administration data, is expected rise to 8.34 million b/d for the week ended Nov. 27 as travelers take to the road for the Thanksgiving holiday, according to Platts Analytics forecasts.

"The AAA survey is reporting only a 4.3% year-over-year decline in Thanksgiving holiday driving, which is strong enough to encourage downstream marketers to modestly build inventories in advance of the holidays," said Platts Analytics.

Jet travel is also rising, with the TSA reporting almost 3 million people passed through airport checkpoints Nov. 20-22, marking the highest volumes of travelers since March.

This increase in demand helped margins trend higher during the week, which will likely support an uptick next week. Platts Analytics daily margins show WTI MEH cracking margins averaged $6.04/b on Nov. 20 compared with $4.89/b on Nov. 16.

US Atlantic Coast Refining Margin Averages ($/b)

Bonny Light Cracking

Arab Light Cracking

Bakken Crude Cracking

Forties Cracking

Week ending November 20

2.97

3.26

2.13

3.60

Week ending November 13

4.28

3.97

3.03

4.91

Q4 to date

4.33

3.47

2.90

4.79

Q4-19

7.06

2.57

13.13

5.23

Q3-20

3.63

1.84

3.62

3.59

Q2-20

2.92

4.46

1.66

3.13

Source: S&P Global Platts Analytics

US Gulf Coast Refining Margin Averages ($/b)

LLS Cracking

WTI MEH Cracking

Maya Coking

Mars Coking

Week ending November 20

5.07

5.52

4.29

3.79

Week ending November 13

5.27

5.89

4.87

4.20

Q4 to date

4.90

5.64

4.92

3.95

Q4-19

10.99

11.27

9.93

9.30

Q3-20

4.23

5.09

3.61

2.84

Q2-20

3.65

4.16

6.03

2.40

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 November 20

5.40

3.38

6.84

3.13

Week ending November 13

6.74

4.81

7.92

4.23

Q4 to date

6.20

4.56

7.29

4.66

Q4-19

12.32

11.19

12.04

12.21

Q3-20

5.65

4.24

5.60

4.18

Q2-20

3.54

3.13

3.86

2.65

Source: S&P Global Platts Analytics

US West Coast Refining Margin Averages ($/b)

ANS Cracking

Vasconia Coking

Arab Medium Coking

Napo Coking

Week ending November 20

9.20

10.60

9.09

8.29

Week ending November 13

10.75

12.99

10.58

10.29

Q4 to date

10.26

11.76

9.37

10.16

Q4-19

17.62

22.22

18.88

20.59

Q3-20

9.67

11.00

7.91

9.63

Q2-20

8.39

7.04

9.30

8.42

Source: S&P Global Platts Analytics

Singapore Refining Margin Averages ($/b)

Dubai Cracking

Arab Light Cracking

ESPO Cracking

Arab Light Coking

Week ending November 20

-1.20

-0.79

-1.60

-1.24

Week ending November 13

-0.88

-0.53

-0.68

-0.84

Q1 to date

-1.00

-0.41

-0.98

-0.62

Q4-19

-0.38

-2.45

1.02

-0.32

Q3-20

-2.06

-2.27

-1.24

-2.62

Q2-20

-2.51

3.13

-3.35

2.98

Source: S&P Global Platts Analytics

ARA Refining Margin Averages ($/b)

WTI MEH Cracking

Bonny Light Cracking

Arab Light Cracking

Urals Cracking

Week ending November 20

-0.13

0.39

-0.19

-0.14

Week ending November 13

0.73

1.38

0.84

0.61

Q4 to date

1.08

1.92

0.82

0.89

Q4-19

5.96

6.32

3.94

5.89

Q3-20

0.40

1.68

-0.90

0.51

Q2-20

-1.28

1.19

4.80

0.46

Source: S&P Global Platts Analytics

Italy Refining Margin Averages ($/b)

Urals Cracking

CPC Blend Cracking

Arab Light Cracking

WTI MEH Cracking

Week ending November 20

0.05

1.56

-0.59

-0.27

Week ending November 13

0.84

2.47

0.36

0.57

Q4 to date

1.22

2.95

0.18

0.76

Q4-19

3.76

7.13

2.17

4.39

Q3-20

0.28

2.17

-1.78

-0.06

Q2-20

-1.31

3.01

2.95

-2.98

Source: S&P Global Platts Analytics