U.S. refiners trim 3Q output amid weaker margins, plant overhauls
U.S. crude oil refiners are trimming 3Q production plans, company executives said in recent earnings calls, as summer fuel demand ebbs and profit margins remain weak.
Operators say they are budgeting more maintenance downtime into forecasts after running at an industry average 95% of capacity earlier this year. Those high oil processing levels led to plentiful gasoline stocks, which benefited motorists but hurt profits.
Matthew Blair, top refining analyst at energy firm Tudor, Pickering, Holt & Co, said refiners are reflecting a weakened margin environment in the third quarter with softer demand. "The hope is if you lower supply you may get higher margins," Blair said, noting the projected percentages of capacity cited by Marathon Petroleum, Valero Energy and Phillips 66.
Top U.S. refiner Marathon Petroleum said it would operate its 13 refineries at 90% of their combined crude intake capacity of 3 MMbpd, down from 97% of capacity last quarter.
Valero Energy, the second-largest U.S. refiner, plans to reduce its processing rate due to plant maintenance and soft margins. The midpoint of its processing target is about 2.86 MMbpd, down from 3 MMbpd last quarter.
Phillips 66, which ran at a five-year high of 98% of capacity in the second quarter, is planning to run its plants in the low-90% of capacity range, executives said, citing a softening in the fuels market.
"Utilization is coming down sort of across the sector," said PBF Energy CEO Matthew Lucey, whose company did not project its third-quarter run rate. "In the summertime, again, we'll lose some utilization," he said.
"We're optimizing our refineries in light of these market conditions," said Greg Bram, vice president of refining services at Valero, referring to the company's plan to reduce operating rates.
HF Sinclair expects planned plant overhauls will reduce its combined run rate by about 7.8% at the midpoint of a range of between 570,000 bpd and 600,000 bpd. Its network ran at a rate of 635,000 bpd last quarter.
The U.S. government's sale of 1 MMbbl of gasoline last quarter from its Northeast supply reserve benefited consumers but hurt refiners. Operators hope supply cuts from maintenance will gradually improve margins this quarter.
Comments