Always glad to help – difficult part is always getting past concept that lot of refinery products are just by-products that really are not primary drivers in refining operations which are mainly controlled by crude price/sweet-sour differentials & light-heavy differentials on the supply side and controlled by product fuels price (gasoline/diesel/jet)/product differentials on the demand side. The demand of a by-product almost never influences any of the supply side production until it threatens to become a crisis that halts/limits the refining drivers.
The test for a whether a refinery product is a by-product or not is that it’s product is equal to or greater than the value of the crude cost. So Refinery Gas/Propane/Butane/Slurry Oil-Decant-CBO/HFO/Asphalt/Petcoke/Sulfur would all be byproducts and impact upon refinery drivers decreases at a higher rate than the decrease in Crude cost percentage.
But you dont always have to have/know the relationship to know the trend potential buy zones. Several of the markets may not have firm relationship but “trend” over time either the price of the crude or the price of nearest product and sometimes both. During times of low values and low refinery margins is often the re-seller/consumers best purchase time for a by-product, whereas times of high values and high refinery margins is often the producer/marketers best sell time for by-products. Any time a market is rapidly changing up/down should be avoided on spot basis. Normally prices for HFO-Asphalt-CBO-Electrode Pitch tend to average 75-80% of WTI crude prices (depending on quality – often Low Sulfur by-products have up to $1 premium over posted by-product index prices). Coker Margins and hence Coker Feedstock values tend to track Refinery Margins & Product differentials or 3-2-1 cracked spreads. Before cost of Low Sulfur fuels Opt Cost was added – A rule of thumb for Coker product value was 75% of Diesel value. Understand once again this is trend not a relationship or tracking value as it would have a correlation of less than 60% far below the 80% it takes to say that there is a relationship.
My advice for asphalt supply sourcing would be to look at Refineries like Nustar/Citgo had where they are really more Aggregate Refineries producing Asphalt than they are Product Refineries producing an Asphalt by-product. Which means the Asphalt producers need to integrate backwards to product their sources and take them into thier markets and out of the refining markets. ……. But it probably won’t happen in the same way that Coal Mine producers never really integrated back forward into the Power Plants they supplied and have now lost the opportunity that was there to expand thier mines & the plants they supplied (as well as stream line some of logistics).
Ok – class is over I usually charge $15-50k for BD basic details and development fundamentals like this! Ha