The shut fluid catalytic cracking unit at PBF Energy's 190,000-b/d Delaware City refinery is expected to return to normal operations in early September after completing repair work, industry sources told OPIS on Thursday.
A fire caused the unplanned shutdown of its gasoline-making unit, which is rated at about 75,000-80,000-b/d, on Aug. 21, and repairs to this unit are expected to take a couple of weeks.
As a result of the unplanned FCC unit shutdown, PBF Energy had brought forward the planned maintenance of the sole crude unit and a reformer by about a month to early September, and this turnaround will be completed in early October.
The FCC unit is expected to run on VGO feedstocks during the crude unit turnaround.
The Delaware City refinery is to return to normal operation by early October.
The FCC shutdown and accelerated crude unit turnaround have failed to jolt the New York Harbor gasoline market as RBOB prices continue to fall amid oversupply concerns. Also, the peak gasoline demand season is winding down at the tail end of summer.
Tesoro Corp. turned in net earnings of $582 million in the second quarter, more than double net earnings of the same period a year ago, buoyed by solid fuel demand and growth in its logistics business, the company reported late Thursday.
Operating income for Tesoro's refineries was $753 million, up from $358 million in second quarter 2014. The higher margins and lower operating expenses (largely due to lower natural gas prices) contributing to the bottom line of a number of refiners were in Tesoro's case partially offset by turnarounds and maintenance, the company said in a statement.
Plant utilization was 92% of Tesoro's total capacity in the April-June period, but the company expects its refineries to run at 95% to 100% utilization in the third quarter.
Tesoro's realized gross refining margin in the second quarter was $19.13/bbl, compared to $13.11/bbl a year earlier, with manufacturing cost (before depreciation and amortization) of $5.58/bbl compared to $5.88/bbl in second quarter 2014.
"Capture rates in the quarter were impacted by the combination of refinery downtime, less advantaged crude oil differentials, and increased processing of intermediate feedstocks in our California and Pacific Northwest refineries," Tesoro said.
Operating income in Tesoro's logistics segment was $109 million in the second quarter versus $48 million in April-June 2014. The company attributed the growth to the Rockies natural gas business and additional volumes from last year's expansion and reversal project on the High Plains Pipeline in North Dakota.
The company's marketing segment (retail and wholesale) notched operating income of $212 million, up from $88 million in the second quarter of last year. The increase was due to strong market conditions and growing consumer demand, according to Tesoro.
Tesoro's California refineries (Martinez and Los Angeles) saw gross refining margin of $20.10/bbl, up from $12.15 a year earlier and its Washington and Alaska refineries showed gross margin of $17.12/bbl, compared to $8.66/bbl in second quarter 2014. Manufacturing costs in both segments were lower in second quarter 2015 versus a year earlier.
However, gross margin in Tesoro's Midcontinent segment (North Dakota and Utah) was lower year on year -- $17.15/bbl in Q2 2015 versus $22.14 in Q2 2014. In addition, manufacturing cost averaged higher for the two refineries -- $5.94/bbl compared to $4.14 in April-June 2014.
The U.S. average retail price of diesel fuel fell below that of regular gasoline earlier this month for the first time since 2009, reflecting stellar overall gasoline demand and unusually high Californian retail prices, although the phenomenon will likely be brief, the U.S. Energy Information Administration said on Thursday.
The average U.S. regular gasoline price was 2.802/gal for the week ended July 20, 2cts higher than $2.782/gal for the average diesel fuel price, as gasoline has surpassed diesel for a second consecutive week, EIA's data showed.
It was the first time since early August 2009 that retail gasoline was pricier than diesel fuel. From August 2009 through June 2015, retail diesel fuel sold at an average of 34cts/gal over regular gasoline, with the difference reaching a peak at 90cts/gal in January, according to the EIA.
According to GasBuddy.com, which provides retail fuel pricing information and data, U.S. diesel's premium over gasoline was the highest in the West Coast, at over 40cts/gal last week. The only other region that also saw the diesel- gasoline inversion was the Midwest at 3.50cts/gal, with prices at the Gulf Coast and Southwest close to parity in the week ended July 19.
While diesel demand tends to be the weakest in the summer, U.S. and global demand for gasoline was unusually strong this year. In addition, even though gas prices at the pump in most parts of the U.S. have followed crude oil prices lower, the national average retail price was lifted by skyrocketed retail gasoline prices in California due to ongoing supply disruptions there.
Traditionally, relatively higher diesel prices reflect a combination of strong global diesel demand, U.S. federal fuel taxes that are 6cts/gal higher than those for gasoline, and higher production costs of ultra-low-sulfur diesel that was phased in between 2006 and 2010 in the Northeast, which accounts for more than 80% of the U.S. heating-oil demand.
However, the rare price parity between U.S. gasoline and diesel retail prices is likely to be a short-term phenomenon, as mogas consumption moderates with the end of the summer-driving season and diesel demand grows in response to agricultural harvest in the fall and the increasing use of home heating oil during winter, the EIA said.
The EIA expects retail gasoline prices to average $2.27/gal in December 2015, compared to diesel fuel's $2.87/gal, it said in its July Short-Term Energy Outlook.
Phillips 66 said it is expanding the accessibility and potential use of E85 by letting marketers in four states offer the blend of 85% ethanol and gasoline under the branded canopy.
The test, launched in response to some marketer demand, affects about 1,300 sites in Iowa, Illinois, Nebraska and Colorado. The states were selected based on requests from marketers and the availability of ethanol.
"Phillips 66 believes the key to a secure energy future is the efficient and effective use of a variety of energy sources," the company said in an announcement. "Ethanol is one energy option which includes other renewable and alternative fuel sources, as well as traditional energy sources like crude oil and natural gas."
Under its normal policy, the major requires branded marketers selling E85 to dispense the blend outside the branded canopy in a separate unbranded fueling dispenser. That policy remains in effect for sites excluded from the pilot program.
And Phillips 66 said it still expects marketers in the E85 test to meet its new image standards.
The major said it will measure customer response to the pilot along with "other operational, demand and quality metrics ... to determine a future offering."
Prices for heavy sour Canadian crude continue to tumble by far more than futures benchmarks such as Brent and WTI. The slide has initially widened margins for refiners in the Great Lakes and Rockies, but it could ultimately result in spot gasoline and diesel prices that approach or slip beneath last winter's lows.
The price of Western Canadian Select (WCS), the closest thing to a benchmark for oil sands production, is now assessed at around $35.50/bbl. Some of that decrease comes thanks to a drop in the August WTI futures quote, which was at $51.25/bbl at presstime, but about $8/bbl of the summer decline is attributable to aggressive discounting by producers who need to find a home for output.
Earlier this summer, WCS sold for a discount of just $6.50-$7.50/ bbl off WTI futures at the Hardisty, Alberta, origination point. This morning finds sellers talking a $15.75/bbl discount for August barrels, and the discount averages some $15.30/bbl off WTI for the rest of 2015. Producers regularly were able to get more than $50/bbl for WCS in late May and early June, but there is the clear prospect that values could flirt with $30/bbl, just as they did at the bottom of the global market last winter.
The wider discounts come thanks to the return of production knocked out by spring wildfires and some upgrader work. But majors such as ExxonMobil's Imperial affiliate continue to ramp up production, and some late-summer turnaround work by refiners such as Flint Hills at its Pine Bend refinery diminished demand. Some other PADD2 maintenance could keep heavy crude oil blends under pressure through autumn.
Companies like Flint Hills, as well as BP (Whiting) and Marathon (Detroit) are the beneficiaries, along with several refiners in the Rocky Mountain region. Delivered barrels of Canadian heavy crude can lay in to plants at $38-$40/bbl. Even with recent price drops, diesel is priced at nearly twice the value of crude, while Chicago CBOB and RBOB sell for $75/bbl and $85/bbl, respectively.
Put another way, diesel and gasoline could lose another 30-50cts/gal and still keep some Midwestern refineries in the black on fuel margins.
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