EIA: Midwest refinery outage is affecting petroleum product markets

The 435 000 bpd refinery has been offline since then because of a power outage. Inventories of motor gasoline and distillate fuel in the Midwest are higher than average for this time of year, which could limit the outage’s effects on product availability and pricing.

Prices have increased more in Chicago for CBOB than on the US Gulf Coast (PADD 3) following the outage. CBOB is a petroleum gasoline stock that refiners produce before blending it with fuel ethanol to make finished motor gasoline. Chicago prices for other refinery products, such as ultra-low sulfur diesel and jet fuel, have also increased.

Usually, Chicago petroleum product prices sell at a small discount to those on the US Gulf Coast, largely because the Midwest region produces about as much refined petroleum products as it consumes. Before the outage, this discount was wider than usual. The relative price increase since the outage has brought Chicago petroleum product prices more in-line with the historical discounts.

Generally, the Midwest region produces enough petroleum products to satisfy regional demand and sometimes transfers products to states outside the region. During periods of planned or unplanned refinery outages, however, regional petroleum product prices tend to increase to attract products from other refining regions, particularly from the US Gulf Coast.

Home to more than 50% of the country’s refinery capacity, the US Gulf Coast produces far more fuel than it consumes. This surplus can be shipped to the Midwest or the US East Coast (PADD 1), or it can be exported to other countries. Petroleum products can flow north from refineries on the US Gulf Coast to the Midwest largely by pipeline during periods of limited supply or increased demand in the Midwest. In 2023 through November, about 300 000 bpd of motor gasoline, diesel, and jet fuel moved from the US Gulf Coast to the Midwest, about 4% of Gulf Coast production.

As of 12 February 2023, Midwest retail gasoline prices were US$3.04/gal, up 13 cents/gal from the previous week. Regional retail diesel prices were US$4.04/gal, up 30 cents/gal.

Read the article online at: https://www.hydrocarbonengineering.com/refining/13022024/eia-midwest-refinery-outage-is-affecting-petroleum-product-markets/