US refinery margin tracker: Weak product prices drag yields lower
New York (Platts)--21 Sep 2015 512 pm EDT/2112 GMT
Refining margins across the US continued to fall last week as summer
support for gasoline, jet fuel and ULSD continued to fade.
Spot product prices have fallen steadily in the Atlantic Coast, Gulf
Coast and West Coast, with the lone support coming from the Midwest amid
a resurgent Chicago gasoline market.
Cracking margins for North Dakota Bakken crude on the Atlantic Coast
briefly turned negative last week as prompt prices for New York Harbor
refined products lost steam.
Bakken margins fell $3 to average 78 cents/b last week and were last
weaker when they held negative territory for the first two weeks of
January.
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.
Weaker product prices in New York Harbor have been led by prompt RBOB
barges, which closed the week around $56.80/b, down from more than $90/b
in early June. By comparison, prompt ULSD barges closed the week at a
$5/b premium to RBOB.
The gasoline-led weakening of USAC margins is hardly surprising as
summer driving demand has come to an end. What is surprising, however,
is how resilient cracking margins have been for rival imported grades.
For example, cracking margins for Nigerian Bonny Light averaged $8.73/b
last week. Like Bakken, Bonny Light margins are down around $3/b week on
week.
While cracking yields for both crudes have tracked closely all summer,
falling through early September, spot prices for Bakken have held up,
while those for Bonny Light have fallen. While the former have risen
near $1/b since the beginning of the month, the latter have fallen
$2.63/b.
Further, Bakken margins factor in a steady $14/b rail cost, while Bonny
Light margins include a volatile Suezmax freight rate. This rate has
risen nearly 70% to just over $2/b so far this month, adding to the
delivered cost of crude.
That said, many USAC refiners have locked in term contracts for Bakken,
and many of these contracts likely include a cheaper rail cost. Lowering
the rail cost helps bring Bakken margins more in line with those for
crudes like Bonny Light. Additionally, with outright prices just above
multiyear lows, USAC refiners are likely buying as much Bakken as they
can store.
This is evident in the most recent monthly US Energy Information
Administration data, which shows crude-by-rail shipments from the
Midwest to the USAC hit a record 448,867 b/d in June, despite a
wide-open arbitrage for West African crude into the US.
In the Midwest, Bakken cracking margins rose around $1.37 last week to
average just over $18/b. Coking margins for West Texas Sour and Western
Canadian Select also rose, averaging $15.47/b and $21.86/b,
respectively.
While Chicago jet and ULSD slid in line with other regions, spot Chicago
pipeline RBOB has rallied nearly $8 since September 8. The Midwest has
seen a spate of refinery issues lately, including work on an FCC at
Phillips 66's 314,000 b/d Wood River, Illinois, refinery as well as a
shut FCC at Norther Tier's 90,500 b/d St. Paul, Minnesota, refinery.
Most recently, BP shut one of two coking units last week at its joint
venture 152,000 b/d refinery in Toledo, Ohio, for planned refinery work,
a source familiar with refinery operations said.
--James Bambino,
james.bambino@platts.com
--Edited by Jason Lindquist,
jason.lindquist@platts.com
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