U.S. oil refiners trim runs amid weak domestic and export demand
U.S. oil refineries have cut their crude processing by almost 100 million barrels so far this year, mostly in response to slack demand at home and overseas.
Crude processing in the year-to-date has fallen for the first time since the recession of 2008/09, according to data from the U.S. Energy Information Administration.
U.S. refineries have processed 16.61 million barrels per day (bpd) of crude so far in 2019, down from 16.91 million bpd at the same point in 2018 (“Weekly petroleum status report”, EIA, Nov. 20).
Some of the reduction can be attributed to the closure of the 335,000 bpd Philadelphia Energy Solutions refinery on the East Coast following an explosion and fire on June 21.
East Coast processing has fallen 138,000 bpd (13%) this year, but processing is also down by 147,000 bpd (1.6%) on the Gulf Coast and by 54,000 bpd (2.2%) on the West Coast.
Nationwide processing has fallen by 1.8% compared with 2018, with refineries on the East Coast accounting for less than half the total reduction.
Instead, refiners have trimmed crude throughput in line with reduced demand for petroleum products to avoid a build up of unwanted stocks crushing their margins.
Nationwide consumption of finished products was down 1.0% in the eight months from January through August, including an 0.5% decline in gasoline and a 1.2% decline in distillates.
Total consumption of finished products, including imports, fell by 44 million barrels in January-August compared with the same period a year ago, the first decline since 2012.
U.S. exports of finished products were also down 30 million barrels in the first eight months, the largest decline for more than 20 years, reflecting weak foreign demand for gasoline, residual fuel oil and petroleum coke.
By throttling back crude processing, U.S. refineries have averted a surplus of gasoline and diesel, but created an even bigger surplus in the crude market, in the process supporting refining margins.
John Kemp is a Reuters market analyst. The views expressed are his own.
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