By BEN LEFEBVRE
US refiners could see new opportunities as Europe's largest
independent refiner and wholesaler of petroleum products shuts
down three of its five refineries, analysts said.
Petroplus Holdings announced the three closings last Friday as
banks starting freezing more than $2 billion worth of the
financially troubled Swiss company's credit lines.
Petroplus has faced stubbornly high crude prices, stagnant
demand and fierce competition from overseas refiners, which has
led to net losses in every quarter except one since 2009.
The refinery shutdowns in France,
Belgium and Switzerland could help US crude processors fill refining gaps and grab market share
in Europe. That could increase the
expanding US exports of oil distillates, such as heating oil
and diesel, to the Continent.
Output from the combined 667,000 barrels a day of refining capacity at the shuttered
refineries already has ceased, while the company's refineries
in UK and Germany are running at half of their combined 330,000
bpd capacity, according to Petroplus CEO Jean-Paul Vettier.
Half of Petroplus's output is diesel, according to a Bank of
America energy newsletter.
Europe has felt the effects of the closures. January diesel
contracts on London's Intercontinental Exchange settled at
$967.50 a metric ton Thursday, up 4.7% for the week, in part
because of supply worries in the wake of Petroplus's
US fuel prices have yet to see any impact from the falloff in
That could start to change if the closures linger through
the winter and allow US refiners to stake stronger claims in
the European market, said Jason
Schenker, president of consultancy Prestige Economics.
"The longer Petroplus stays offline, the greater the
probability for it to have a lasting impact" on US refiners,
With Petroplus's production diminished, Europe's demand for
U.S. diesel will only increase. That will likely result in
higher prices as more customers compete for U.S. fuel supply,
said Sander Cohen, analyst at energy consultancy ESAI
The Petroplus closures "will definitely put pressure on US
diesel markets," Cohen said.
American refiners already
have been feeding Europe's growing appetite for heating oil and
The US exported a record 1.07 million barrels a day of
distillates last October, the last month for which statistics
are available, according to the US Energy Information Agency.
That's up 22% from a year before.
Europe was the destination of 48.4% of all US distillate
exports in October, an increase from 43.5% a year prior,
according to the EIA.
The enhanced opportunity for US refiners comes at a good time
for companies like Valero and Marathon Petroleum.
They could use extra diesel sales to Europe to offset an
expected drop-off from what had been near-record level profit
margins in 2011.
For most of last year, refiners with operations in the Midwest
benefited from easy access to cheap oil caused by a glut of
crude at the oil storage hub in Cushing, Okla.
As that price advantage has shrunk, so have those refiners'
How long European refining woes could last is still being
debated, analysts said. Europe has spare refining capacity that could be
brought online to make up for Petroplus's former output.
However, the region struggles with old, inefficient
equipment and is dependent on European grades of crude like Brent
oil, which has been more expensive than the crude used by most
US refiners for about a year.
In contrast, Valero, Marathon Petroleum and other US refiners
have invested billions of dollars in equipment upgrades over
the past few years to become more efficient.
Dow Jones Newswires