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Product Markets and Refinery Operations

60

OPEC Monthly Oil Market Report – October 2017

Product Markets and Refinery Operations

Product markets in the Atlantic Basin improved further in September at the top of the barrel on the back of

higher gasoline demand. The middle distillate market continued to improve globally on the back of healthy

demand and depleted stocks amid regional maintenance. However, the bottom of the barrel saw some

pressure due to low demand and high inventory levels in Asia and Europe. In sum, the global refining

market showed strength as economies improved.

Refinery margins

In the

US

, market strength due to reduced product

availability contributed to significantly higher

refining margins, with support coming mainly from

the top of the barrel and middle distillates. Refining

profitability increased by around $10/b in

September 2017 compared to the same month a

year earlier, mainly supported by the impact of the

Hurricane. Furthermore, refinery margins were

boosted by high demand for middle distillates amid

low inventory levels.

European refining margins

showed some

improvement in September, increasing from

$8.78/b to $9.42/b compared with last month,

supported by higher arbitrage to the US despite

high regional fuel oil supply, higher ARA inventories

and planned maintenance.

Graph 6 - 1:Refining margins

Asian refining margins

remained almost flat, showing a slight 4¢/b improvement compared with last

month’s figures, as strengthening middle distillate regional demand was offset by lower utility demand for

bunker fuel and weak gasoline demand.

Refinery operations

In the

US,

refinery throughput took a plunge, as

US Gulf Coast (USGC) refinery utilization rates

decreased due to shut downs caused by Hurricane

Harvey, as well as planned maintenance, which led

to reduced crude input levels. Average US refinery

utilisation dropped by 12 pp to 83.2% in September.

With the landfall of Hurricane Harvey, refinery runs

plunged to 14.4 mb/d in the week of 8 September,

which was further exacerbated by the onset of the

refinery maintenance season. By the week ending

22 September, refinery runs had recovered to

16.4 mb/d and continued broadly unchanged into

the week ending 29 September. Compared with

previous hurricanes, this shows a much faster

rebound in refinery inputs, as out of 20 affected

refineries, 15 had already returned to operation.

Graph 6 - 2:Refinery utilisation rates

4

6

8

10

12

14

16

18

4

6

8

10

12

14

16

18

Sep 16

Oct 16

Nov 16

Dec 16

Jan 17

Feb 17

Mar 17

Apr 17

May 17

Jun 17

Jul 17

Aug 17

Sep 17

US$/b

US$/b

WTI (US Gulf)

Brent (Rotterdam)

Oman (Singapore)

Sources: Argus Media and OPEC Secretariat.

70

80

90

100

70

80

90

100

Sep 16

Oct 16

Nov 16

Dec 16

Jan 17

Feb 17

Mar 17

Apr 17

May 17

Jun 17

Jul 17

Aug 17

Sep 17

%

%

US

EU-16

Japan

Singapore

Sources: EIA, Euroilstock, PAJ, Argus Media