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07 Dec 2020 | 21:38 UTC — New York
Highlights
Higher crude prices eat into margins
Saudi Aramco lowers most January crude prices
New York — Refinery margins have fallen across the world as coronavirus cases increased again, forcing refiners to trim runs, an analysis from S&P Platts showed on Dec. 7., and Saudi Arabia has reduced the majority of its January official crude prices as it increases output resulting from the OPEC+ pact.
Crude prices rose to six-month highs last week after the OPEC+ producer group said it would partially extend production quotas into early 2021, increasing output for January 2021 by as much as 500,000 b/d for the month.
Initially seen as bullish for crude prices—and bearish for refining margins—the pact calls for monthly meetings to adjust the following month's production total. The caveat is likely to create market volatility in the new year.
The new production agreement gives Saudi Arabia an additional 126,000 b/d crude allocation in January. Following the pact's announcement, Saudi Aramco released its official selling prices for January, which cut prices for US and Northwest European refiners and increased them for Asia and some Mediterranean buyers as it seeks to regain competitiveness in a shrinking market.
In Asia, despite negative margins, Chinese refineries are expected to raise January runs before the spring maintenance season begins and ahead of the Saudi Aramco's 80 cents/b increase for Arab Light to Asian refiners.
Arab Light coking margins for Chinese refiners averaged minus $1.46/b for the week ended Dec. 4, while cracking margins averaged minus $1.34/b, S&P Global Platts Analytics margin data showed.
Expectations for the week ended Dec. 11 are for Arab Light coking margins to rise to minus 78 cents/b, with cracking margins to average minus 61 cents/b.
Global refined product demand is improving as coronavirus lockdowns begin to ease but is still significantly lower than prior years, which is reflected in lower refinery runs and increased downtime, according to Platts Analytics data.
Downtime—which includes refinery maintenance, idling of units and shutdowns—is expected to be 16.4 million b/d in December, or about 16% of global refining capacity.
In the US, Platts Analytics forecasts 4.57 million b/d of crude capacity will be offline in December, with totals rising to 4.73 million b/d in January.
Along the US Gulf Coast, refiners are expected to rein in crude throughput further in January 2021 by taking offline 1.6 million b/d, compared with 1.53 million b/d offline in December. USGC offline conversion capacity, including cokers and fluid catalytic cracking units, will increase to 2.168 million b/d in January from December's 2.024 million b/d.
Despite lower planned runs, Saudi Aramco cut Arab Light's price to the Americas for January by 30 cents/b, making it more competitive with regional grades. Arab Light coking margins for the week ended Dec. 4 for USGC refiners averaged $3.35/b, putting it in line with Maya and Mars but below the $4/b for Vasconia.
California on late Dec. 6 imposed a new set of lockdowns to prevent a new wave of coronavirus infections from overwhelming the state's hospitals.
Governor Gavin Newsom has divided the state into five regions, and lockdowns will be imposed once regional hospital intensive care unit capacity falls below 15%. However, some regions have instituted lockdowns of their own such, such as the stay-at-home order issued by populous Los Angeles County last week.
Lower prices for Saudi crude in January will make margins more competitive with local crudes. USWC coking margins for Vasconia fell from $13.38/b to $10.33/b for the week ended Dec. 4, surpassing Arab Medium coking margins of $8.90/b.
US West Coast refiners are already expected to have 1.08 million b/d of crude distillation capacity offline in December, with that number rising to 1.1 million offline in January.
And downtime for the primary transportation fuel units, like cokers and FCC units, are expected to rise to 745,000 b/d in January from 726,000 b/d in December.
In Europe, Platts Analytics forecasts 2.63 million b/d of crude capacity will be offline in December, with January expectations lower at 2.399 million b/d. Northwest Europe will account for about 1.73 million b/d offline in December, following the closures of four refineries which took down 670,000 b/d of refinery capacity.
Saudi Aramco kept prices of Arab Light for Northwest European refiners unchanged for January as it maintains an edge from Russian competition. For the week ended Dec. 4, Arab Light cracking margins in NWE averaged minus 70 cents/b compared with minus 84 cents/b for Russian Urals.
US Atlantic Coast Refining Margin Averages ($/b)
Bonny Light Cracking
Arab Light Cracking
Bakken Crude Cracking
Forties Cracking
Week ending December 04
3.06
3.04
2.93
3.01
Week ending November 27
3.48
4.33
3.44
4.18
Q4 to date
4.09
3.53
2.95
4.55
Q4-19
6.75
1.63
12.58
4.63
Q3-20
3.63
1.84
3.62
3.59
Q2-20
2.92
4.46
1.66
3.13
Source: S&P Global Platts Analytics
US Gulf Coast Refining Margin Averages ($/b)
WTI MEH Cracking
Arab Light Cracking
Mars Coking
Maya Coking
Week ending December 04
5.58
2.88
3.58
3.85
Week ending November 27
6.36
3.91
4.65
4.40
Q4 to date
5.72
3.11
4.01
4.77
Q4-19
10.61
2.80
8.51
9.83
Q3-20
5.09
1.51
2.84
3.61
Q2-20
4.16
3.20
2.40
6.03
Source: S&P Global Platts Analytics
US Midwest Refining Margin Averages ($/b)
Bakken Cracking
WTI Cushing Cracking
Syncrude Cracking
WCS ex-Cushing Coking
Week ending December 04
4.95
2.71
5.78
1.88
Week ending November 27
5.58
3.56
6.80
2.98
Q4 to date
6.04
4.30
7.13
4.24
Q4-19
11.38
10.07
11.19
11.04
Q3-20
5.65
4.24
5.60
4.18
Q2-20
3.54
3.13
3.86
2.65
Source: S&P Global Platts Analytics
US West Coast Refining Margin Averages ($/b)
ANS Cracking
Vasconia Coking
Arab Medium Coking
Napo Coking
Week ending December 04
9.45
10.33
8.90
7.83
Week ending November 27
11.69
13.53
11.83
10.42
Q4 to date
10.38
11.87
9.65
10.00
Q4-19
14.88
19.23
16.02
17.93
Q3-20
9.67
11.00
7.91
9.63
Q2-20
8.39
7.04
9.30
8.42
Source: S&P Global Platts Analytics
Singapore Refining Margin Averages ($/b)
Dubai Cracking
Arab Light Cracking
ESPO Cracking
Arab Light Coking
Week ending December 04
-1.54
-1.06
-1.76
-1.18
Week ending November 27
-1.31
-0.98
-1.87
-1.30
Q4 to date
-1.08
-0.54
-1.17
-0.76
Q4-19
-0.88
-2.99
0.62
-0.71
Q3-20
-2.06
-2.27
-1.24
-2.62
Q2-20
-2.51
3.13
-3.35
2.98
Source: S&P Global Platts Analytics
ARA Refining Margin Averages ($/b)
WTI MEH Cracking
Bonny Light Cracking
Arab Light Cracking
Urals Cracking
Week ending December 04
-0.23
0.40
-0.70
-0.24
Week ending November 27
-0.13
0.28
-0.44
-0.20
Q4 to date
0.81
1.58
0.53
0.64
Q4-19
5.41
6.07
3.34
5.24
Q3-20
0.40
1.68
-0.90
0.51
Q2-20
-1.28
1.19
4.80
0.46
Source: S&P Global Platts Analytics
Italy Refining Margin Averages ($/b)
Urals Cracking
CPC Blend Cracking
Arab Light Cracking
WTI MEH Cracking
Week ending December 04
-0.37
1.69
-1.37
-0.60
Week ending November 27
-0.21
1.82
-0.87
-0.43
Q4 to date
0.89
2.69
-0.09
0.49
Q4-19
3.03
6.47
1.61
3.75
Q3-20
0.28
2.17
-1.78
-0.06
Q2-20
-1.31
3.01
2.95
-2.98
Source: S&P Global Platts Analytics