U.S. refiners build new oil processing as travel rises

Shirpur Gold Refinery

16/05/2023 14:04

By Erwin Seba
       HOUSTON, May 16 (Reuters) - U.S. oil refiners aim to run
at up to 94% of a total 17.9 million barrels per day processing
capacity this quarter, according to company forecasts and
analysts, driven in part by expectations of seasonal travel
demand.
    Strong prices and demand since late 2021 have encouraged
refiners to run above 90% of their processing capacity and in a
sign that they expect fuel demand to remain high, two refiners
have added units or enhanced their output, reviving a once
routine practice that disappeared amid COVID-19 closures.
    This quarter is traditionally one of the year's hottest for
demand as companies build gasoline and jet fuel output for the
summer vacation season. Motorist group AAA on Monday predicted
the May 27-29 Memorial Day holiday weekend will be the third
busiest for auto travel since 2000 and most active at U.S.
airports since 2005. 
    This quarter's pace compares to 91.3% utilization in the
year-ago quarter and the 71.5% and 87.8% run-rates in 2020 and
2021 as the industry struggled with COVID-19 lockdowns that
reduced fuel consumption and crushed industry profits. 
    
    BELOW PAR INVENTORIES 
    Behind the higher run-rate is the fact that motor fuel
stocks are beneath their 5-year averages. Gasoline and
distillates inventories are 7% and 16% below, investment firm
Tudor Pickering Holt & Co estimated. 
    "Demand trends are strong in gasoline and jet (fuel)," said
Matthew Blair, a managing director at Tudor Pickering. He
estimates refiners overall will run at 94% utilization rate this
quarter, matching the 2017-19 average for the period.  
    Among larger refiners, Marathon Petroleum  MPC.N  plans to
run at 91% of capacity, Valero Energy  VLO.N  at between 90% and
93%, and Phillips 66  PSX.N  in the mid-90s, officials said.
    "I would expect utilization to go up a couple of points
(this quarter)," from the early May run rate of 91%, said David
Hackett, chairman of fuel consultancy Stillwater Associates. 
    High prices will keep U.S. refinery utilization rates at
levels near last year's about 91.7% this year and next, the U.S.
Energy Information Administration forecast in January. 
    Refiners will add the capacity to process an additional
328,000 bpd in this quarter, increasing gasoline and diesel
supplies this summer.
    Exxon Mobil  XOM.N  added 250,000 bpd at its Beaumont,
Texas, refinery; Citgo Petroleum Inc 38,000 bpd at its Lake
Charles, Louisiana, plant; and Marathon Petroleum Corp  MPC.N 
40,000 bpd at its Galveston Bay Refinery in Texas City, Texas.  
    Two others whose refineries were offline last quarter -
Suncor's  SU.TO  in Commerce City, Colorado and Cenovus'
 CVE.TO  in Superior, Wisconsin, are resuming operations.
    "Margins are not going to be as robust as they have been in
the past year and a half," said John Auers, managing director of
Refined Fuels Analytics. 

 (Reporting by Erwin Seba; Editing by Alexander Smith)
 ((erwin.seba@thomsonreuters.com; +1 832 746 4269; Reuters
Messaging: erwin.seba.thomsonreuters.com@reuters.net))