Higher-cost crude could squeeze margins at US refiners

Source:Reuters-Global Times Published: 2017/8/7 17:08:40

US refiners could face a continued squeeze on profit margins in the months ahead as dwindling supplies of heavy crude from Venezuela and elsewhere are leading several to switch to higher-priced but easier-to-refine light, sweet crude.

The shift also could mean higher prices for consumers in the last weeks of the summer driving season and into the fall if refiners are able to pass along those higher costs to drivers, analysts said.

PBF Energy Inc, Valero Energy Corp, Phillips 66 and Marathon Petroleum Corp said in earning calls over the past two weeks that they are running more light crude as a result of narrower discounts for heavy crude. ExxonMobil Corp also is running a heavier slate of light crude at a Gulf Coast plant.

Refiners' "margins have already been heavily impacted," said John Auers, executive vice president at refining consultancy Turner, Mason & Co. "They will be impacted in the third quarter."

The final period's outlook could depend on whether the US applies sanctions on Venezuelan imports, Auers said.

Through June, US imports of Venezuelan crude declined 7.1 percent compared with the same six month period last year to 654,078 barrels per day, according to Reuters data.

Light, sweet crude costs more than heavier oils, narrowing the discount that US refiners, especially those along the Gulf Coast, have gained by configuring their plants to run heavy, sour crude over the past 20 years.

In part, the companies are reacting to high costs and anticipating weaker supplies of Venezuelan crude coming to the US. Heavy crude prices also have been impacted by tax changes in Russia that have raised prices of its heavy crude and by reduced production from Canada last quarter.

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