Refining Community Logo

RE: US Refining Downtime lasting longer – Utilization lower

Home Forums Refining Community Refinery News US Refining Downtime lasting longer – Utilization lower RE: US Refining Downtime lasting longer – Utilization lower

#6949

Charles Randall
Participant

Here is view from Marathon that US refining downtime is taking longer partially due to all upgrading for heavy crudes slowing maintenance work, but doesn’t believe economic reasons are responsible for decreased utilization rates.  
 
However, current refinery utilization this week are @ 82.4% the third lowest since Hurricane Lili Oct 2002 79.4% or Hurricanes Rita/Katrina Sept 2005 69.8%. But Tesoro and COP have said they cut rates because margins are down 35%, and
it is clear the high prices in weakened economic environment is causing some demand destruction (along with higher ethanol blending & diesel use backing out demand). Fed has admitted for first time yesterday that an economic recession is possible.
 
The US Chief Economist for Commodity Futures Commission continues to bury his head in sand or (other body parts) claiming prices are not driven by speculative trading – several Senators stated opposite view. Reality check is @ a$66/BBL crude gasoline was $3/gal currently crude is $104/BBL and gasoline is $3.2/gal dropping margins by 40-50% despite little drop in demand and it hasn’t been fundamentals driving volatility spikes in market.
 
I have been tracking the reduced utilization / production in US via the petcoke production which has remained at / below 2004 levels (39-40 mm mtpy) for 4 years now despite adding some +3.5-5.0 million mtpy of additional coking capacity via new cokers or debottlenecking.
This capacity exist as overhang and the larger number of coker projects coming online this year (plus last year’s new cokers operating for full year production) and long time idled capacity like BP Tx City’s 1 mm mtpy petcoke finally coming back online.
 
Petcoke, much like the refining prospects – has all making’s this year for a perfect storm of higher capacity coming online at time of price driven demand destruction, displaced demand from alternate fuel use, and recessional economic environment making its normal 4-5 year cycle (always more prevalent at end of 2 term president’s).
Regards

Refining Community