Refinery runs in US and Europe to stay low

Refinery runs in the United States and Europe should remain low over the next six months as distillates prices remain weak, Energy Security Analysis, Inc. (ESAI) said.
"Refiners' main incentive to sustain throughput volumes in 2008, distillate strength, has now disappeared, pulling down their refining margins," Wakefield, Massachusetts-based ESAI said in its latest Atlantic Basin oil products outlook.

US refinery utilization rates, which have recently been low, should begin climbing after March, the petroleum consultancy noted. But ESAI said it sees a 300,000 bpd year-on-year decrease in US throughput levels to 14.7 mm bpd in the next six months, with New York Harbour refining margins averaging $ 8.30 per barrel during this period, down from $ 8.80 per barrel a year ago.
The report predicts throughput to plummet in Europe to 11.8 mm bpd in the next six months -- March through August -- down about 680,000 bpd from a year ago. The Rotterdam notional refining margins are seen averaging $ 5.70 per barrel, down from $ 14.60 a year ago.

According to the latest available US government data, domestic refineries were operating at 82.1 % of capacity in the week to March 13 with crude runs up 64,000 bpd that week to 14.18 mm bpd. The price of gasoline in New York Harbour rose to a premium over heating oil in February for the first time since September 2007, "marking the return of the heating oil -- RBOB (HORB) spread to its traditional pre-2008 pattern," ESAI said.
"The spread's shape, however, is not due to the typical springtime strength of gasoline but rather to this year's weakness in distillates," added ESAI.

Falling distillate demand will leave Atlantic Basin refining margins dependent on lacklustre US gasoline demand and restrain Atlantic Basin throughput levels, ESAI said.
In the first two months of 2009, refiners have consequently cut backs on runs, helping to bring a measure of strength to US gasoline fundamentals and a margin floor for that fuel, the report added.