US Gulf Coast refining margins strengthened as refiners moved forward to restart their plants back after unusually low temperatures forced them offline in mid-February, supporting refining margins higher than the same time in 2020, an analysis from S&P Global Platts showed March 8.
The freeze overwhelmed Texas’ stand-alone electricity grid, and refiners shut down their plants to conserve power for residents to heat their houses, sending USGC refinery utilization to 40.9% for the week ended Feb. 26, the lowest level on record reported by the Energy Information Administration.
On a weekly basis, USGC refining margins jumped higher across the board for the week ended March 5, with WTI MEH cracking margins averaging $12.61/b compared with the $11.88/b the week earlier, S&P Global Platts Analytics data showed.
But by week’s end they began to taper off as more refineries returned to service and the price of crude gained on news the OPEC+ group to keep crude production unchanged in April. As a result, WTI MEH cracking margins, which were calculated at $12.81 on March 1, dropped to $11.78/b by March 5.
Most of the 5 million b/d of Texas refinery capacity offline in mid-February has returned or will return to service over the next week, as calculated from company and regulatory filings by S&P Global Platts, and the increased output was also pressuring margins.
The ripple effect
But the widespread cold which blanketed much of the nation impacted refinery operations well beyond the USGC. Completion of turnarounds underway were delayed and some refiners took advantage of plant shutdowns to move up planned work, as Delek US did at its 83,000 b/d El Dorado, Arkansas, plant.
The turnaround underway at Calumet’s Shreveport, Louisiana, plant was delayed by more than a week, and the company’s other two small plants in northwest Louisiana – the 13,020 b/d Cotton Valley and the 8,000 b/d Princeton – were down for about a week, company executives said.
“We had a continuous freeze for over a week in Northwest Louisiana and two major ice events,” Stephen Mawer, Calumet’s CEO, said March 3. Mawer added that these events caused external consequences which hampered production, included a shutdown of truck movements and loss of municipal water supplies.
Midwestern margins also got a boost from USGC outages which shut USGC-to-Midwest pipelines like Explorer. Particularly hard-hit were Group 3 refiners where plants like CVR’s 74,500 b/d Wynnewood, Oklahoma, plant and its 132,000 Coffeyville, Kansas, facility also shut down for about a week, due to extreme cold and power grid instability, company executives said.
Although grid instability at that region’s Southwest Power Pool was not as prolonged or severe as that at Electric Reliability Council of Texas, it still created refinery snags which were still seen supporting higher margins so far in the current week.
The Group 3 cracking margin for WTI ex-Cushing reached $20.60/b on March 5, higher than the week’s average of $19.99/b, Platts Analytics data showed.
The restart of the Explorer Pipeline, combined with a smaller weather-related impact on area plants, tempered Chicago market margins. WTI ex-Cushing dropped to average $12.02/b for the week ended March 6, compared with the $12.20/b the week earlier.
USAC imports begin to taper off
Lower USGC output cut volumes were sent to the US Atlantic Coast, increasing imports of gasoline and distillates into the region while supporting higher margins there and in Europe.
However, as USGC refinery operations were returning to normal, USAC margins were also drifting lower, in tandem with those in Northwest Europe, a main exporter of refined products into the USAC.
Cracking margins for Bonny Light along the USAC dropped 10 cents/b week on week to reach $8.55/b for the week ended March 5, after starting the week at $9.06/b on March 1. Northwest Europe Bonny Light Cracking margins also fell to $3.95/b from $4.36/b the week earlier despite a slight uptick for the week ended March 5 in gasoline and distillates to 131,000 b/d and 123,000 b/d, respectively, according to Kpler commodity tracking data.
This compares with exports of 46,000 b/d of gasoline and 123,000 b/d of distillates for the week ended Feb. 26.
However, margins and exports from the Mediterranean into the USAC remained ample. USAC gasoline imports averaged 96,000 b/d for the week ended March 5, well above the four-week average of 44,000 b/d, Kpler data showed.
Cracking margins for CPC Blend rose from $4.80/b for the week ended Feb. 26 to $4.93/b the week ended March 6, Platts Analytics data showed. However, margins trended lower at the end of the week to $4.41/b on March 6.
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