IN THE NEWS / U.S. Refinery Sector Slows Amid Slump In Margins
NEW YORK, Sept 24 (Reuters) - The U.S. oil refining sector has slowed from a blistering pace up to the end of August to its slowest since last May as companies finally succumbed to an end-of-summer slump in margins.
Refineries had been running virtually flat out from the end of May until the end of August, before falling sharply.
"Margins have gone down from July through August. Refinery runs have gone down in response...there have been announcements and the weekly data show that runs are down over half a million barrels per day (bpd)," said Aaron Brady, an analyst at Boston-based Energy Security Analysis Inc.
On "Refinery Row""along the Gulf Coast, refiners last month saw a negative return for processing benchmark West Texas Intermediate crude, the first negative return this year, according to Reuters calculations based on standard product yields.
Just as the third quarter rolls to its end, refinery margins in the U.S. have eroded to the lowest this year to around $3.04 per barrel, according to analyst Paul Ting at Salomon Smith Barney.
Margins have so far dipped $0.05 below those in the first quarter, when the warm winter put a stranglehold on heating oil demand, and sent oil prices reeling downward.
Although U.S. refiners target their production toward gasoline and generally see weaker margins after the summer gasoline season ends, margins in the third quarter are over $2.00 lower year-on-year, according to Salomon Smith Barney.
It is then not surprising that the American Petroleum Institute (API) late Tuesday reported that crude throughputs last week have shrunk by nearly 640,000 barrels per day (bpd), or down over 4 percent, to just over 15 million bpd from their peak production this year, just two weeks earlier.
The last time throughputs were below 15 million bpd or below 97 percent of operational capacity was in May.
Seasonal autumn refinery maintenance shutdowns were behind the fall in throughputs, market sources said.
But most of the turnarounds were spurred by the weakest refinery margins seen this year.
Weak margins prompted Sun Co. Inc. to bring forward a planned 21-day maintenance turnaround on a 177,000-bpd crude oil distillation unit at its Philadelphia refinery, to Oct. 3 this year from February 1999.
"It makes sense for us to do this work now, when inventories are high and margins are low," said David Knoll, senior vice president for Sun Northeast Refining.
In addition to Sun's Philadelphia schedule, confirmed turnarounds in the U.S. and Canada from August to October will cut at least 532,000 bpd or over 17 million barrels of crude production.
Unconfirmed maintenance will nearly double the total drop in refinery output to 1.04 million bpd:
-- Sun's 70,000-bpd Toledo, Ohio, crude unit was shut Sept. 18 for four to five weeks.
-- Tosco Corp. , the largest U.S. independent oil refiner, announced in late August it cut crude runs by 15 percent, or 70,000 bpd until the market improves, in addition to the shutdown of a 110,000-bpd crude unit at its Bayway, New Jersey, plant, which went into a 35-day maintenance period on Sept. 14.
-- British Petroleum Co. Plc has scheduled a 20- to 30-day turnaround at a 30,000-bpd crude unit at its 160,000-bpd Toledo, Ohio, refinery at the end of September, after earlier run cuts of 5 percent to 10 percent, or by 8,000 bpd to 16,000 bpd, in July and August.
-- Exxon Corp. started a six-week turnaround at its 145,000-bpd crude unit at Baytown, Texas, from Aug. 30.
Market sources said Exxon also has another turnaround of around 200,000 bpd at the huge 432,000-bpd plant in Baton Rouge, Louisiana, on which the company has declined comment.
-- Mobil Corp. also won't comment regarding the shutdown at its 204,000-bpd Joliet, Illinois, crude plant in September.
-- Canada's North Atlantic Refining Ltd, a major exporter of refined products to the U.S., is also planning a routine maintenance at its 105,000 barrel-per-day refinery at Come-By-Chance in Newfoundland for "a few weeks""this fall, a company spokeswoman said. She added, however, that no specific details have been set. |
