REFINERY MARGIN TRACKER: US margins rise but new, impending lockdowns loom

New York — US refinery margins trended higher in the week ending Dec. 11, but new lockdowns in New York and California to prevent the coronavirus' spread weighed on values late in the week, an analysis from S&P Global Platts showed Dec. 14.

Reminiscent of the early days of the pandemic, when New York City and California were first movers to impose mandated shutdowns, the states have begun to reimpose lockdowns as infections have soared, cutting oil product demand and increasing inventories.

Lockdowns put in place Dec. 6 have cut driving in California to the lowest since mid-May, according to Apple Mobility data, with driving in San Francisco and Los Angeles reduced by 25% and 9%, respectively, in the week.

Analysts surveyed by Platts on Dec. 14 expected total US gasoline stockpiles to have climbed 2.6 million barrels last week, putting them more than 5% above the five-year average of US Energy Information Administration data at 240.5 million barrels.

Reduced gasoline demand drove down US West Coast cracking margins, with Bakken crude cracking margins averaging $4.19/b for the week ended Dec. 11, S&P Platts Global Analytics data showed, due to a bump in mid-week values to $5.16/b on expectations the coronavirus vaccine rollout will begin this week.

But despite these positive sentiments, the USWC Bakken cracking margin on Friday, Dec. 11, fell to $4.99/b, showing a downward trend as rising coronavirus cases cut the number of intensive care hospital beds and triggered the state's stay-at-home order.

Despite lower demand in California, USWC margins have been supported by increased production of non-CARB fuels by California refineries. While California refinery production of CARBOB gasoline dropped by 2% for the week ended Dec. 4 to 5.6 million barrels, the most recent data from California Energy Watch showed production of non-California gasoline rose by 59.4% to 706,000 barrels. CARB diesel production dropped 14.7% during the same time, while other diesel production rose by 90.1%.

New York lockdowns

On the US Atlantic Coast, Bakken cracking margins rose to $3.61/b for the week ended Dec. 11, but also showed an end-week trail-off ahead of a new ban on indoor dining in New York City restaurants by Governor Andrew Cuomo beginning Dec 14. The margin on Dec. 11 was 4 cents/b lower than $4.03/b on Dec. 10.

Ahead of the limited ban, New York City driving rose 8%, according to Apple Mobility data, but New Jersey driving metrics showed a 23% increase in driving on less-stringent restrictions for dining, luring some New York diners to drive across the Hudson River

Gasoline imports from Northwest Europe refiners into the USAC rose to 726,000 b/d for the week ended Dec. 4, well above the 522,000 b/d the week earlier, according to most recent EIA data. The increased imports helped firm up NWE margins.

Platts Analytics data shows Bonny Light cracking margins for NWE refiners averaged $1.12/b for the week ended Dec. 11.