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Refinery margin tracker: Distressed Canadian crude margins slip, Bakken margins fall in their wake

New York — Margins for refiners running highly discounted crude from Western Canada inched lower last week as crude prices rose ahead of expected production cuts by Alberta's premier, Rachel Notley, an analysis by S&P Global Platts showed Monday.

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Rising Canadian crude prices pulled up the price of North Dakota's Bakken as well, weakening margins enough to possibly slow the current resurgence of crude by rail to the US Atlantic Coast and tamp down demand for nascent crude exports from Buckeye's Perth Amboy, New Jersey, terminal.

Notley on Sunday announced an 8.7% cut in Alberta's oil production, which will take 325,000 b/d of Canadian crude off the market beginning in January 2019 for at least three months in order to draw down record high storage and support higher prices.

Expectations are for even lower Western Canadian crude refining margins this week as Western Canadian Select, Mixed Light Sweet and Syncrude crude prices continued to gain early Monday.

WCS' discount to WTI narrowed by $10/b in early Monday trade, and was heard to trade at the NYMEX calendar-month average minus $19.50/b, compared with Friday trades at minus $29/b.

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Last week, coking margins for Western Canada Select, Alberta's heavy benchmark crude, fell across US refining centers, with Midwest coking margins dropping over 7% to $35.96/b for the week ended November 30, Platts margin data showed, down from the $42.10/b average margin the week earlier.

Platts margin data reflects the difference between a crude's netback and its spot price. Netbacks are based on crude yields, which are calculated by applying Platts product price assessments to yield formulas designed by Turner, Mason & Co.


While rising Bakken prices could curtail volumes of the crude railed to the US Atlantic Coast and the US West Coast, Bakken cracking margins for both regions still far exceed those of alternate crudes.

USAC Bakken cracking margins averaged $24.73/b the week ended November 30, compared with the $6.71/b Bonny Light cracking margin.

However, both USAC refining margins and nascent demand for exporting Bakken out of Buckeye's Perth Amboy, New Jersey, terminal could be impacted if Bakken prices and/or rail costs rise significantly.

Crude by rail to the USAC has regained some of the momentum lost in 2015, when crude-by-rail volumes from the Bakken averaged about 370,000 b/d. September volumes of crude by rail to the USAC averaged 80,000 b/d, Energy Information Administration data showed.

Phillips 66 began upping volumes railed to its 258,000 b/d Bayway refinery in Linden, New Jersey, from one train/month to one train/week about two months ago, according to a source familiar with refinery operations.

PBF Energy, which has a rail yard at its 182,200 b/d Delaware City, Delaware, refinery, brought in between 10,000 b/d and 12,000 b/d of Bakken in the third quarter.

At its 160,000 b/d Torrance, California, refinery, PBF expected to use more domestic crude at the expense of more expensive waterborne barrels, including between 8,000 b/d and 10,000 b/d of WCS.

USWC Bakken cracking margins averaged $29.52/b for the week ended November 30, compared with $35.47/b the week earlier. USWC margins for Canada's Mixed Light Sweet were also lower at $47.34/b, compared with $51.85/b the week earlier.


Notley's aim is to increase the value of Alberta's crude and narrow the discount by $4/b between WCS and the NYMEX WTI calendar-month average, which averaged $33.00/b last week, according to Platts assessments. In October, the weekly spread was as wide as $50/b.

On Friday, WCS ex-Hardisty was assessed by Platts at $22.14/b, up from the $17.45/b assessment at the beginning of the week.

Sunday's announcement comes on top of Notley's earlier initiative to increase takeaway volumes by boosting crude-by-rail capacity by 120,000 b/d with the acquisition of more rail cars and locomotives.

On the US Gulf Coast, WCS coking margins dropped almost 5% to average $31.84/b for the week ended November 30, compared with the $35.60/b the week ended November 23.

The price of WCS ex-Nederland, Texas, averaged $49.48/b the week ended November 30, more than double that of Hardisty barrels.

The wide spread between the two regions highlights the impact of takeaway constraints on the value of the crude at wellhead versus the value of barrels at USGC refining centers or to docks for export to Europe, which is what Notley seeks to narrow with her initiatives.

US Atlantic Coast Refining Margin Averages ($/b)
Bakken cracking Bonny Light cracking Arab Light cracking Hibernia cracking
Week ending Nov 30 24.73 6.71 7.04 6.15
Week ending Nov 23 27.07 7.73 7.89 6.63
Q4 to date 21.79 7.97 6.89 5.83
Q4-17 5.25 9.82 7.50 7.23
Q3-18 12.74 11.10 9.41 9.02
Q2-18 10.83 10.97 8.93 8.16
Source: S&P Global Platts; Turner, Mason & Co.
US Gulf Coast Refining Margin Averages ($/b)
LLS cracking Mars coking Maya coking WCS coking
Week ending Nov 30 7.08 6.60 1.69 31.84
Week ending Nov 23 8.04 7.35 1.65 35.60
Q4 to date 9.10 7.74 3.02 43.05
Q4-17 9.03 9.58 11.13 17.26
Q3-18 11.84 11.30 12.22 29.73
Q2-18 10.80 10.76 14.38 18.57
Source: S&P Global Platts; Turner, Mason & Co.
US Midwest Refining Margin Averages ($/b)
Bakken cracking WTI cracking WTS coking WCS coking
Week ending Nov 30 24.10 8.10 16.10 35.96
Week ending Nov 23 28.89 11.98 19.29 42.10
Q4 to date 24.35 12.43 19.32 48.92
Q4-17 12.80 13.38 14.52 24.76
Q3-18 16.03 12.89 28.11 36.29
Q2-18 12.35 10.74 20.26 23.76
Source: S&P Global Platts; Turner, Mason & Co.
US West Coast Refining Margin Averages ($/b)
ANS cracking Mixed Light Swt cracking Escalante coking Oriente coking
Week ending Nov 30 9.61 47.34 6.91 10.58
Week ending Nov 23 12.91 51.85 10.42 15.02
Q4 to date 12.15 51.97 10.74 14.80
Q4-17 8.09 17.91 9.24 12.99
Q3-18 10.22 29.51 11.55 14.25
Q2-18 10.69 29.40 14.25 16.65
Source: S&P Global Platts; Turner, Mason & Co.
Singapore Refining Margin Averages ($/b)
Arab Heavy cracking Arab Medium cracking Dubai cracking Qatar Land cracking
Week ending Nov 30 2.27 1.15 3.93 3.07
Week ending Nov 23 3.41 2.20 5.13 4.20
Q4 to date 3.10 2.11 5.35 3.73
Q4-17 4.82 4.34 7.03 5.69
Q3-18 2.69 2.41 6.11 4.75
Q2-18 3.42 2.78 6.02 4.33
Source: S&P Global Platts; Turner, Mason & Co.
ARA Refining Margin Averages ($/b)
Arab Light cracking Brent cracking Ekofisk cracking Urals cracking
Week ending Nov 30 6.44 6.43 6.23 5.88
Week ending Nov 23 7.72 8.15 7.96 7.41
Q4 to date 6.17 6.06 6.42 7.20
Q4-17 6.29 6.02 6.56 6.45
Q3-18 7.38 7.06 7.68 7.56
Q2-18 6.81 5.97 6.43 7.26
Source: S&P Global Platts; Turner, Mason & Co.

-- Janet McGurty,

-- Edited by Annie Siebert,