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Product Markets and Refinery Operations

OPEC Monthly Oil Market Report – September 2017

61

Product Markets and Refinery Operations

Refinery margins in the Atlantic Basin strengthened in August. In the US, margins rose amid a product

supply shortage in the wake of Hurricane Harvey, coupled with already firm domestic demand promoting

higher product crack spreads. In Europe and Asia, product markets increased as supply outages in the US

encouraged higher arbitrage volumes and healthy seasonal demand provided further support to refinery

margins.

Refinery margins

US

product crack spreads surged in the month of August amid refinery outages as Hurricane Harvey hit the

Texas shore, halting US Gulf Coast (USGC) refinery operations. The gasoline crack spread rose as a result,

while being fundamentally supported by robust domestic demand. Total product demand continued to

increase to reach around 9.7 mb/d in August, based on preliminary weekly data. Middle distillate demand

also strengthened, supporting rising margins in the wake of Hurricane Harvey, with the jet/kero crack spread

gaining a firm $5/b m-o-m, additionally supported by firm domestic demand. US Gulf refinery margins for WTI

crude gained more than $3.2/b versus the previous month’s levels to average around $13.3/b during August,

with refinery utilization rates reaching as high as 95.2% .

Graph 6 - 1: Refinery margins

Product crack spreads in

Europe

displayed a rise in August, excluding fuel oil, which declined. Product crack

spreads were affected by supply outages on the USGC and increasing arbitrage opportunities to the US and

Latin America, particularly for middle distillates. The refinery margin for Brent crude in Northwest Europe

(NWE) showed an increase of $1.1/b versus the previous month to average $8.8/b.

Asian

product crack spreads exhibited improvements across all product categories with the exception of fuel

oil. Strong seasonal demand and a reduction in stock levels continued to lend support to refinery margins,

which increased for Oman by $1.8 to $11.1/b in August compared with a month earlier.

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Aug 16

Sep 16

Oct 16

Nov 16

Dec 16

Jan 17

Feb 17

Mar 17

Apr 17

May 17

Jun 17

Jul 17

Aug 17

US$/b

US$/b

WTI (US Gulf)

Brent (Rotterdam)

Oman (Singapore)

Sources: Argus Media and OPEC Secretariat.