Italian refiner Saras said cuts by Opec producers have increased the price of heavier, sour crude grades, while lighter grades have fallen in price, narrowing spreads to the firm's detriment.
Saras chief executive Dario Scaffardi said he had been sceptical of Opec's ability to cut output — indeed when Opec cuts were but a proposal, he said they lacked credibility in November.
Scaffardi today said production cuts from Saudi Arabia and Kuwait had targeted cheaper, heavier crude grades, and this had pushed up prices. At the same time increased volumes of lighter grades had come on the market, some of which Saras said came from rapidly-rising US production, and this in turn pushed down the price of sweeter grades.
This narrowing of the spread between grades was "not really useful to us," Scaffardi said.
Saras has positioned itself so it could profit from discounts on heavier crude grades, by blending a string of different grades from a wide variety of producers. Scaffardi said the outcome of the Opec cuts was "a bit contrary" to the company's expectations.
Saras benefited in 2016 from a widening spread between heavier and lighter grades, increasing its use of what it describes as medium sour grades to 39pc from 17pc in 2015. Light sweet grades on Saras' slate declined from 40pc to 33pc.
Saras had some unplanned downtime at a catalytic cracker at its 300,000 b/d Sarroch refinery, Sardinia, in December, which company now said cut throughput. The firm had said runs were not affected, but refinery throughput was around 260,000 b/d in the fourth quarter, down from a previous estimate given that had aimed at 275,000 b/d over the period.
Saras' throughput for 2016 was slightly over 260,000 b/d, down from 290,000 b/d in 2015, largely a result of a turnaround programme at the start of last year.
The firm said its 2017 maintenance schedule was already underway and would be likely to extend into the first two weeks of April. This would include works on crude distillation, desulphurisation, and visbreaking units. Some smaller works would also take place in the third and fourth quarters. As a result the company is guiding throughput at Sarroch of 255,000-265,000 b/d in the first quarter of this year, with annual throughput forecast at 280,000-290,000 b/d.
The firm posted a profit of €196mn ($207mn) in 2016, compared with €224mn a year earlier, as margins declined. Saras also announces an adjusted profit which includes a different methodology to that of the IFRS in the evaluation of its oil and product inventories. Its adjusted net profit was €169mn in 2016, compared with €326mn in 2015.
