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US Fuel Production To Be Affected By Heavy Schedule Of Refinery Maintenance

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Walter Siegmund (CC BY-SA 3.0)

As the European Union’s ban on Russian petroleum products imports takes effect, data providers have revealed that US oil refineries are planning to conduct twice as many maintenance overhauls this spring compared to the usual number. The aim is to resume maintenance that was delayed due to the pandemic and the opportunity to benefit from record-high margins. According to Reuters and refining intelligence firm IIR Energy, at least 15 US oil refineries are planning maintenance outages lasting between 2 to 11 weeks through May. This will result in a drop of 1.4 million barrels per day of processing capacity by mid-February, which is double the five-year average. This may result in a tightening of supplies of gasoline and diesel and an increase in margins.

Due to strong margins, many plants were hesitant to shut down operations last year, but now they must complete necessary maintenance, according to refining analyst John Auers of Refined Fuels Analytics. In the spring, nine US refineries operated by major companies such as Marathon Petroleum, Valero Energy, Exxon Mobil, Phillips 66, and BP will be closing some of their fuel production units, as reported by IIR and Reuters sources. Additionally, TotalEnergies is planning to restart the majority of units at its Port Arthur, Texas refinery, which were closed in late December due to extreme cold weather.

Margins are already high in fuel production, and they are continuing to rise with the planned maintenance outages. The gasoline crack spread is currently around $26 per barrel, which is $5 higher than last year. The margins for heating oil are even higher, currently at $58 per barrel, more than double the levels of the previous year. Inventories of US gasoline are currently at 226.8 million barrels, compared to 240.7 million at the same time last year. Furthermore, the capacity of refineries is 8% lower than it was before storm Elliott. Bob Yawger, the director of energy futures at Mizuho, said that refineries will have a difficult time catching up with the struggling refinery row.

Additional capacity will be available soon in the market. Exxon has recently begun the start-up procedures for its $2 billion expansion of the Beaumont, Texas refinery. Iraq’s Karbala oil refinery is expected to begin operations in March and a second phase of Kuwait’s 615,000 barrel per day al-Zour refinery is planned to commence next quarter. According to refining analyst John Auers, the launch of these new plants along with others across the world in the first half of the year, should prevent any major shortages of products.

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