U.S. refiners hold output at high levels as fuel inventories sag
- Gasoline stocks at two-year low have refiners increasing runs
- CVR, Valero increase 4Q utilization rates
U.S. oil refiners this quarter expect to run their plants at above 90% of their crude processing capacity on low inventories and improving demand for gasoline and diesel, executives and industry experts said.
Run rates in the year's final quarter tend to cool after the end of the U.S. summer driving season. But weaker than usual fuel inventories are encouraging high run rates even amid weaker profit margins, analysts said.
Top refiners laid out plans to run their networks at between 90% and 94% of capacity through the end of the year, executives said during earnings calls in recent weeks. That range is slightly above the year-ago level.
“This is a little bit less of a seasonal decline than we have seen in previous years,” said Matthew Blair, chief refining analyst at financial firm Tudor Pickering Holt. “Despite lower gasoline margins, U.S. refineries are generally still cash-positive. In addition, product inventories are relatively low.”
Refiners' operating margins fell this year as new refineries in Asia, Africa and the Middle East came online, boosting global supplies as demand growth weakened.
Top U.S. refiner Marathon Petroleum, which operates 16% of the nation’s 18.4-MMbpd processing capacity, plans to operate its 13 refineries at 90% of their combined capacity, similar to a year ago.
“The global macro environment continues to exhibit refined product demand growth,” said Marathon CEO Maryann Mannen.
High runs, less maintenance. The second largest independent refiner, Valero Energy, expects to run at up to 94%, executives said, after its refining profit tumbled in the third quarter. CVR Energy also will increase its run rate despite sharply lower third-quarter earnings.
Phillips 66 plans on running at a combined operating rate in the low-to-mid 90s percentage range, executives said. Smaller refiners Par Pacific and HF Sinclair both plan to reduce their run rates this quarter.
But for all U.S. refiners, "the upper end of the range is very strong," said Kpler lead Americas oil analyst Matt Smith. "It continues the trend we saw in the second half of this year with high runs and shallow maintenance" levels.
“If you’re still making money on the incremental barrel, if the margin is still above the operating cost, you’re going to do it,” said analyst John Auers, managing director of consultancy Refined Fuels Analytics.
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