U.S. Refineries Forecast to Run at 'Relatively High' Rates this Summer

Propelled by strong margins, U.S. refineries are expected to run at "relatively high" utilization rates this summer, according to the U.S. Energy Information Administration's (EIA) June?Short-Term Energy Outlook.

Wholesale prices for petroleum like diesel and gasoline, which have increased more than the price of the crude oil used to make them, will drive the higher rates, according to the EIA. Historically high crack spreads for both diesel and gasoline increased in the first several months of 2022, it noted.

"In response to these high prices, we expect that refinery utilization will reach a monthly average level of 96% twice this summer, near the upper limits of what refiners can consistently maintain," according to the EIA's Friday?Today in Energy?report. "We expect refinery utilization to average 96% in June, 94% in July, and 96% in August."

The EIA estimates U.S. refinery inputs will average 16.7 million barrels per day (BBL/d) during the second and third quarters of 2022.

The EIA said it expects wholesale prices for gasoline and diesel to begin decreasing in the third quarter of 2022, as refinery production increases. However, prices will remain well above previous years through the summer, it added.

In a June 6 blog, the refining industry trade group American Fuel & Petrochemical Manufacturers (AFPM) indicated there's no easy fix for increasing the amount of petroleum fuels above current capacity levels.

"After more than two decades of growth in which the United States became the world's largest refiner by volume, our industry has contracted," the AFPM said. "We've lost 1.1 million barrels of daily refining capacity over the course of the global pandemic with at least seven facilities shuttering, closing units or beginning the transition away from petroleum processing."

The closures haven't stopped in the U.S.?LyondellBasell Industries NV?(NYSE:LYB) (Rotterdam, Netherlands) plans to shut its 268,000-BBL/d Houston Refinery in Texas, one of the largest in the U.S., in an effort to exit its refining business, by the end of next year.

"Political and financial pressure to move away from petroleum-derived fuels, costs associated with federal and state regulatory compliance and facilities' singular economic performance all inform these decisions" to shut down refineries, the trade group said. It added that the drop in fuel demand over the course of the pandemic "certainly sped up the timeframe for refining contractions, closures and transitions, but many of these moves were already planned or underway..."

AFPM did note that capacity expansions at existing operational refineries are underway, mainly aimed at increasing throughput of U.S. light, sweet crude oil.

Industrial Info is tracking a number of U.S. refinery expansions, including?Exxon Mobil Corporation's?(NYSE:XOM) (Irving, Texas)?expansion of its refinery in Beaumont, Texas,?as part of its Beaumont Light Atmospheric Distillation Expansion (BLADE) initiative. The project will increase the capacity of the 344,000-BBL/d refiner by installing a third crude unit with the ability to process 250,000 BBL/d. Completion is planned for early 2023. Subscribers to Industrial Info's Global Market Intelligence (GMI) Petroleum Refining Project Database can?click here?for a detailed project report.

Marathon Petroleum Corporation?(NYSE:MPC) (Findlay, Ohio) is working to?increase the capacity of its 437,000-BBL/d Galveston Bay Complex?in Texas by 40,000 BBL/d to improve gas oil and distillate yields. The expansion is part of Marathon's South Texas Asset Repositioning (STAR) project). Completion is planned for early 2023. Subscribers can learn more by?clicking here.

Phillips 66 Company?(NYSE:PSX) (Houston, Texas) is working to expand the capacity of its existing 247,000-BBL/d Sweeny Refinery in Old Ocean, Texas, through the construction of a 150,000-BBL/d?natural gas liquids (NGL) fractionation unit addition. Completion is planned for July. Subscribers can?click here?for more information.

Subscribers can?click here?for all three project reports featured in this article and?here?for the related plant profiles.

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