Refiners start slowing from summer peak

NEW YORK: Refiners, which were benefiting from an oversupplied crude market’s price collapse, are now tackling a glut of their own.

As US gasoline inventories persistently mount, even during the summer driving season, refiners are starting to process less crude and plan to slow down further into the second half of the year to correct the surplus.

The overhang of large supplies of diesel fuel and heating oil earlier this year, coming out of a warmer-than-usual winter, had now turned into a gasoline issue, said PBF Energy Inc chief executive officer Thomas Nimbley during the company’s second-quarter earnings call.

“We took a distillate problem and turned it into a gasoline problem,” Nimbley said. The only way to solve that problem is to reduce the amount of product refineries are churning out, he said.

The rising stockpiles have led gasoline prices to decline over the past two months, and with crude up almost 60% from this year’s low, profit margins for refineries are shrinking. The gasoline crack spread, a rough measure of the profit from processing a barrel of oil into fuel, has dropped almost 30% since January.

The high refinery run rates that are typical of this time of year may have peaked ahead of the seasonal fall maintenance period. — Bloomberg