Breaking News
Investing Pro 0
Free Webinar - Crude Oil Trading 2023 | Thursday, February 9, 2023 | 01:00PM PST Enroll Now

U.S. oil refinery run-rates could top 90% for 3rd quarter in a row

Commodities Sep 28, 2022 07:16AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: An aerial view of LyondellBasell-Houston Refining is seen in Houston, Texas, U.S. August 31, 2017. REUTERS/Adrees Latif/File Photo/File Photo
 
CVX
-2.35%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
XOM
-0.87%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
VLO
-0.30%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
CL
+0.14%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Erwin Seba

HOUSTON (Reuters) - U.S. oil refinery utilization rates, a measure of how operators view future fuel demand, could top 90% next quarter for the third consecutive period, industry analysts projected, reflecting scant stocks and strong demand for diesel.

Historically, utilization rates fall in the fourth quarter as refiners begin winter maintenance and motor fuel consumption slips after U.S. summer driving season ends. This year's final quarter, however, could see operators hold production rates high to grab strong diesel margins, they said.

The forecast excludes the potential impact of a major hurricane striking the U.S. Gulf Coast, home of nearly half the nation's oil refining. It also excludes unplanned refinery outages or a possible deep economic recession that cuts demand, analysts said.

Refiners will avoid a direct hit by Hurricane Ian, which is taking aim at Florida.

“Lower gasoline cracks have pulled refining margins down in recent weeks, but overall margins are still quite attractive," said Matthew Blair, head of refining research at energy specialist Tudor Pickering Holt & Co. “We would expect 90% or higher barring a major hurricane,” he added.

Overall U.S. utilization - the amount of oil processed compared to a plant's rated capacity - was above 92% and 93%, respectively, in the second and third quarters this year, he said. The first quarter averaged 89.5%.

Profit margins this year have been very strong, but have cooled with declines in gasoline consumption. The margin from selling diesel from a barrel of oil and replacing that barrel, called the diesel crack spread, this week was about $54 per barrel on the Gulf Coast, compared to about $12 a year ago, according to Refinitiv.

Refinery operators have run at high levels this year in part due to capacity losses from plant closures during the Coronavirus pandemic. U.S. crude oil capacity is down nearly 1 million barrels per day since early 2020, to 17.9 million barrels per day (bpd).

DIESEL DEMAND

Demand in Europe has made diesel supplies tighter globally, said John Auers, managing director of Refined Fuels Analytics, part of consultancy RBN Energy.

“Diesel margins will be higher, Auers said. “I think that will be pushing refining margins.”

U.S. Energy Secretary Jennifer Granholm in August wrote to refiners Valero Energy (NYSE:VLO), Chevron (NYSE:CVX) and Exxon Mobil (NYSE:XOM) asking they reduce product exports and build U.S. fuel supplies, citing "historically low levels of gasoline and diesel in parts of the country."

However, exports of distillate, primarily diesel, soared to 1.76 million bpd in the week ended Sept. 16, from 579,000 bpd a year earlier. At the same time, inventories fell to 117.3 million barrels, down 12 million barrels from the same week a year ago.

Worries over tighter diesel supply are boosting refinery runs, said Robert Yawger, director of energy futures at Mizuho.

"Refiners are worried about the distillate situation being at multi-year lows,” Yawger said. “They’re trying to make more distillate.”

Holding runs above 90% runs the risk of further eroding gasoline margins. About 46% of a barrel of oil is processed into gasoline and only 27% to diesel.

U.S. gasoline stocks rose by 1.6 million barrels in the week ended Sept. 16 to 214.6 million barrels, the EIA said.

Diesel output could jump next year as Exxon completes a 250,000 bpd oil-processing expansion to its Beaumont, Texas, refinery. Offsetting that, LyondellBasell Industries’s plans to permanently close its 263,776 bpd Houston refinery by the end of 2023.

U.S. oil refinery run-rates could top 90% for 3rd quarter in a row
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email