November 21, 2019

North America Short Term Refinery Margin Outlook

Stratas Advisors

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North America's quarterly margin ranged between 12.6 USD/bbl (Q4 2018) and 9.6 USD/bbl (Q1 2019), with current margins are estimated at 11.3 USD/bbl (Q4 2019). Going forward, margins are estimated to reach 9.7 USD/bbl (Q4 2020). 

 

North America refining margins are influenced by the following factors:

 

  • Brent-WTI Differential (8.6 USD/bbl in 4Q 2018, 4.6 USD/bbl in 4Q 2019, 4.1 USD/bbl in 4Q 2020)
  • Light-Heavy Crude Differential (4.8 in 4Q 2018, -3.3 in 4Q 2019, -3.8 in 4Q 2020)
  • Sweet-Sour Crude Differential (8.1 in 4Q 2018, 3 in 4Q 2019, 2.3 in 4Q 2020)
  • Gasoline Crack Spread (9.5 in 4Q 2018, 11.4 in 4Q 2019, 12.8 in 4Q 2020)
  • Distillate Crack Spread (24.6 in 4Q 2018, 22 in 4Q 2019, 18.6 in 4Q 2020)
  • Clean and Dirty Product Differential-Gasoline (6.7 in 4Q 2018, 20.3 in 4Q 2019, 28.5 in 4Q 2020)

112119NaCrudeMap

Note: WTI at Cushing
Source: Stratas Advisors

 

  • Hydroskimming: Refinery margins benefitted from widening Brent-WTI differential (3Q 2017 – 4Q 2019). After 2019, margins will continue to find support from Brent-WTI differential, but clean and dirty product differential, will negatively affects the margins, since these refineries lack capability to produce higher yields of clean fuels

  • Cracking: Refineries were negatively impacted by narrow Gasoline – WTI spread (3Q 2018 – 2Q 2019). After 2019, margins will continue to find support from Brent-WTI differential, and will find support from improved Gasoline – Fuel Oil differential

  • Hydrocracking-Cracking: Refineries were negatively impacted by narrow Gasoline – WTI spread (3Q 2018 – 2Q 2019), but were able to offset from ULSD-WTI spread during the same period. After 2019, margins will continue to find support from Brent-WTI differential, and will find support from improved Gasoline – Fuel Oil and ULSD – Fuel Oil differentials

  • Coking: Refineries were negatively impacted by narrow Maya-WTI (Light-Heavy) and Dubai –WTI (Sweet-Sour) differentials, this is expected to continue. However, refers will benefit from improved Gasoline – Fuel Oil and ULSD – Fuel Oil differentials after 2019

 

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