In the EIA's May 2022 Short-Term Energy Outlook (STEO), it was forecasted that US refinery utilisation will reach as high as 95% on a monthly average basis this summer in response to high product prices and crack spreads for gasoline, distillate fuel oil, and jet fuel.
Crack spreads are the difference between the price of crude oil and the wholesale price of a refined petroleum product, and industry participants use them to estimate refining margins. It is expected that prices for gasoline, distillate fuel oil, and jet fuel will begin decreasing after May as refinery maintenance from April comes to an end, increasing production and reducing some of the pressure on prices in the current market. Even with increased refinery operations and declining prices this summer, wholesale fuel prices and crack spreads are expected to remain well above historical levels through the summer.
The EIA estimates that US refinery utilisation in April 2022 was 90% of operable capacity as planned maintenance — which often occurs between February and April — and unplanned refinery outages contributed to relatively lower refinery inputs despite rapid increases in April refining margins. In May 2022, refinery utilisation is expected to increase to 93%, and then to 95% in June, before averaging 94% in 3Q22. Refinery utilisation usually increases during the summer as demand for gasoline increases in the US. In addition to this normal seasonal trend, lower product inventories (both domestic and global) in 2022 have provided additional financial incentives for refiners to increase refinery utilisation and throughput to meet demand for refined products. These low inventories, combined with the effects from Russia’s full-scale invasion of Ukraine and associated sanctions, have contributed to the rapid increases in prices that encourage refiners to increase production. One indicator of these market conditions, the US 3-2-1 refinery crack spread calculated against West Texas Intermediate (WTI) crude oil, increased by over 100% from February through April.
It is expected that refinery utilisation, at nearly 95%, will reach near the upper limits of what refiners can consistently maintain durin summer 2022. At the same time, refinery crude oil inputs — or refinery runs — are likely to reach a high of 16.8 million bpd in June; this high remains below the five-year (2017 – 2021) high for June of 17.7 million bpd set in 2018. Production volumes for major products are also expected to be below their five-year highs through the summer. This trend results from reduced refinery capacity in the US after several refinery closures and conversions took place during 2020. These closures were largely motivated by decreased vehicle fuel demand related to COVID-19 pandemic responses in 2020. However, other factors also contributed to lost capacity; for example, the Philadelphia Energy Solutions refinery closed because of an explosion in 2019. Other global refiners have faced similar pressures since the beginning of the COVID-19 pandemic, and the resulting decrease in global refining capacity is contributing to present low product inventories and higher crack spreads around the world.
Read the article online at: https://www.hydrocarbonengineering.com/refining/12052022/high-crack-spreads-to-drive-elevated-refinery-utilisation-in-the-us/
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