MONITORING REFINERY MARGINS: Refinery margins drop at the end of seasonal works; omicron remains an unknown

Strong points

Variant of Omicron seen spreading, but impact uncertain

Expected increase in refining cycles in December

Global refining margins showed a weaker trend for the week ended November 26 as refiners completed seasonal plant maintenance and restarted their plants, but by the end of the week concerns over the spread of the omicron strain of the coronavirus and the possible impact on demand have gained ground, an analysis by S&P Global Platts showed Nov. 29.

Not registered?

Receive daily email alerts, subscriber notes, and personalize your experience.

Register now

The omicron variant of the coronavirus, initially identified in South Africa, has spread with cases reported in Scotland and Portugal. Countries like Japan, Israel and Morocco began closing their borders to foreign visitors, although the true threat of the mutated virus remained unknown, according to the World Health Organization.

“It’s too early to impact mobility. Just something to watch,” said Alan Struth, analyst at S&P Global Platts Analytics.

According to estimates from S&P Global Platts Analytics, global offline crude distillation capacity in November was pegged at 10.968 million bpd, falling to 9.176 million bpd in December, which is expected to remain stable.

According to Platts Analytics, most inactive refinery units have been restarted in Europe and the United States, with one major exception: TotalEnergies 220,000 bpd Donges, France, refinery which is completely closed and is expected to be closed until March .

The increased supply of refined products has weakened refinery margins in Northwest Europe, with 1940s crack spreads averaging $3.43/bbl for the week ending 26 November, compared to $5.41/bbl the previous week, according to refining margins from S&P Global Platts Analytics.

In the Mediterranean, CPC blend crack spreads slipped slightly to average $6.57/bbl for the week ended November 26, from $6.58/bbl the previous week.

America’s Coastal Margins Are Weakening

US Atlantic Coast and US West Coast margins declined while US Midwest and US Gulf Coast margins increased.

USAC crack spreads for Urals crude averaged $8.58/bbl for the week ending Nov. 26, compared to $8.81/bbl the previous week, as the restart local refineries increased product supply, according to margin data from Platts Analytics.

USAC’s total gasoline imports increased for the week ended Nov. 26 to 523,000 bpd from 318,000 bpd the previous week, supported by the return of scheduled work at the Irving refinery in Saint John, in New Brunswick, based on product tracking data. by Kpler.

USWC margins also softened, with Arab Heavy coking margins falling to $22.91/bbl for the week ended Nov. 26, from $24.38/bbl the previous week.

However, the closure of Canada’s Trans Mountain Pipeline due to flooding in British Columbia is creating crude supply shortages for more than 650,000 bpd of Washington State’s refining capacity. Approximately 90% or approximately 214,000 bpd of the crude transported on the 330,000 bpd pipeline is exported to their five plants.

Midwest outages drive up USGC margins

US Midwest margins increased for the week ended Nov. 26, with ex-Cushing WTI crack spreads averaging $10.99/bbl from $9.87/bbl the previous week. A series of planned and unplanned outages helped boost margins, including a fire at one of two crude units at the PBF Toledo refinery on Nov. 23 that is expected to keep the refinery at reduced rates for two weeks.

U.S. Gulf Coast margins also rose, helped by the ripple effect of lower Midwest supply pulling barrels north. USGC crack spreads for WTI MEH averaged $13.25/bbl for the week ended November 26, compared to $11.77/bbl the previous week, as gasoline demand strengthened ahead of the Thanksgiving holiday.

According to Patrick De Haan of, gasoline demand on November 28 was the highest Sunday demand observed in 2021, 8.3% higher than November 21 and 7.6% higher than the average of the last four Sundays.

Logical steps

If there is a return to lockdowns to prevent the spread of the new strain of coronavirus, refiners are likely to return to the logical steps followed during the pandemic, which is to first cut cycles, then idle a crude unit if the plant has more than one, and the alternation of restarting and idling crude units on a monthly or weekly basis.

“That’s been the strategy since the start of the coronavirus,” said Joe Pezzino, refining analyst at S&P Platts Analytics.

Although omicron’s impact on demand for refined products is not yet clear, refiners are ready for normal operations in December, in part due to lower than average refined product inventories.

“Crude for December cycles is already committed, if not already in the reservoirs,” said Sergio Baron, market analyst at Platts Analytics. “No one will save crude oil for later runs with the market in reverse. So the December runs will go ahead as planned.”

US Atlantic Coast Refining Margin Averages ($/bbl)

Source: S&P Global Platts Analytics

US Gulf Coast refining margin averages ($/bbl)

Source: S&P Global Platts Analytics

US Midwest refining margin averages ($/bbl)

Source: S&P Global Platts Analytics

US West Coast Refining Margin Averages ($/bbl)

Source: S&P Global Platts Analytics

Average refining margins in Singapore ($/b)

Source: S&P Global Platts Analytics

Average ARA refining margins ($/b)

Source: S&P Global Platts Analytics

Average refining margins in Italy ($/b)

Source: S&P Global Platts Analytics