By LYNN DOAN
US refineries processed a record volume of oil last week as
plants in the Midwest raised operating rates to take
advantage of widening discounts for domestic crudes.
runs climbed to 16.6
million bpd, the most in weekly Energy Information
Administration data going back to 1989, and plants operated
at 93.8% of capacity, the highest level since August 2005.
Crude demand surged 5.4% in the Midwest, where fuel producers
are enjoying record seasonal discounts for Canadian and
domestic crudes versus US benchmark West Texas Intermediate.
Hydraulic fracturing and horizontal drilling are helping to
draw record volumes of crude out of shale formations across
the middle of the country, giving US fuel producers an edge
over their peers abroad. The tight-oil boom has boosted
domestic production to the highest level in more than a
Refiners in the Midcontinent are benefiting from very
inexpensive, cheaper crude, which of course is translating
into higher runs, said Andy Lipow, an oil industry
consultant with Lipow Oil Associates. Margins have been
good, and were finally at a rare period where all
refineries are operating well.
Western Canada Select, a heavy, sour blended crude, was
unchanged versus WTI at a $23/bbl discount as of 1:10 p.m.,
its lowest level for this time of year since at least 2008,
data compiled by Bloomberg show. Oil from North
Dakotas booming Bakken shale formation weakened by 55
cents to $7.75/bbl.
Crude rates at refineries in the western US jumped 8.4% last
week after plants including ones operated by Tesoro and
ExxonMobil finished unit repairs.
Whatever the incentives were in each region, the
refiners really increased their capacity, said Robert
Merriam, manager of petroleum supply statistics at EIA, the
Energy Departments statistical arm. If it all
hits in one week, its going to push us to record
levels. And thats what weve got.
Midwest refineries ran at a record 100.3% of operable
capacity, EIA data show. The agencys capacity total
accounts for anticipated shutdowns and normal operating
conditions, so rates can actually rise above 100 percent when
plants are running optimally, Merriam said.
Youve got to look at the cracks and crude
differentials, and thats how you end up at 100.3
percent, he said. In a short period of time, if
theyre not taking a refinery
down, they can easily
exceed that calendar-day capacity, and thats what many
of them decided to do in that region for this particular