US midcon refining fortunes rise as inventories fall
Houston, 1 November (Argus) — Refinery outages and pipeline repairs have set up US midcontinent refiners for a strong fourth quarter, executives for two companies said today.
Regional gasoline and diesel inventories have fallen to two-year lows after Hurricane Harvey slashed US Gulf coast supplies to the region ahead of planned maintenance for midcontinent refiners. Ongoing repairs to a leak reported last week on the 660,000 b/d Explorer Pipeline system connecting Texas refiners to Oklahoma and Chicago-market customers have extended tight supplies.
A WTI-based 3-2-1 crack spread for the Chicago market in October averaged more than double the same period last year, at $23.64/bl, based on Argus assessments.
"As turnarounds are completed we expect inventories to somewhat normalize," Jack Lipinski, chief executive of midcontinent refiner CVR Energy, said in an earnings call. "But, again, going into year-end, we are looking at improved crack spreads and we are optimistic that the overall market is recovering."
Total volumes of gasoline in the region fell to a two-year low of 45.5mn bl last week and 26.7mn bl of ultra-low sulfur diesel, according to Energy Information Administration (EIA) data published today.
Inventories in Magellan Midstream Partner's sprawling midcontinent products system face demand drawing supplies to 17 days for gasoline and 24 days for diesel, HollyFrontier said today during a quarterly earnings call. The company operates 260,000 b/d of midcontinent refining capacity.
"Each of these ratios is at or near six-year lows," HollyFrontier commercial vice president Tom Creery said on an earnings call.
Explorer expected to complete repairs and restore full service on its pipeline system this week. Maintenance work in the region has also begun to wrap up, including work at CVR Energy's 73,000 b/d refinery in Wynnewood, Oklahoma.
But inventories were sufficiently low to maintain stronger refining margins through the end of the year, Lipinski said.