TX Refineries Restarting, Crack Spreads Remain High

Today, markets are in a holding pattern following a slew of bullish news reports over the weekend, from stimulus legislation to falling COVID cases to attacks on Saudi oil. A strengthening dollar yesterday contributed to losses, and clarification that the Houthi attack on Saudi oil failed to cause damage helped alleviate stress.

In Texas, refinery utilization continues facing setbacks, which has contributed to high fuel prices. Last week’s EIA report showed that Gulf Coast refiners reduced their crude inputs by 4.3 million barrels per day – equivalent to 180 million gallons per day. In fuel truckloads, that’s 15,000 truckloads of gasoline plus 7,500 truckloads of diesel each day that went undelivered. No wonder fuel markets have been so tight! Almost a month past the adverse weather, many refiners remain offline. Of the 20 impacted refineries identified by Argus, eight remain completely offline for repairs. Few of the remaining twelve refineries have fully restarted; most are still in the restart process.

With fuel supplies so limited, refiner margins, represented by the 3:2:1 crack spread, are climbing for those still in business. The 3:2:1 crack spread, which fell to around $8/bbl late in 2020, has more than doubled over the past few months, surpassing $19/bbl since early March. A $19/bbl crack spread is historically pretty average – normally, spreads fluctuate between $11-$24/bbl. As refiners slowly come back online in the Gulf, expect crack spreads to fall – meaning fuel prices could fall even if crude prices stay flat. But don’t expect to see crack spreads hit the lows seen in 2020; with inventories closer to five-year averages, crack spreads shouldn’t fall outside their normal $11-$24/bbl range.

This morning, oil markets are trending slightly lower, recovering from last week’s huge rally. WTI crude is trading at $64.58 this morning, shedding 47 cents from Monday’s closing price.

Fuel prices are mixed, with diesel tracking crude while gasoline stands on its own. Diesel is trading at $1.9066, down 0.2 cents from Monday. Gasoline prices are currently $2.0512, up 0.3 cents.

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