Followers | 241 |
Posts | 12150 |
Boards Moderated | 3 |
Alias Born | 04/05/2009 |
Friday, June 10, 2016 9:20:08 AM
The hot summer months are the boom time for U.S. gasoline sales, and naturally the season when refiners are all-in on pumping out the motor fuel for drivers on U.S. highways.
But an unusual glut of gasoline - just as refiners are ramping up to produce more - has caught them on the wrong side of distillate margins for the second time in less than 12 months.
Instead of minting bigger profits on refining gasoline, they are seeing margins shrink because of oversupply, potentially leading to disappointing earnings. U.S. gasoline inventories are currently about 9 percent above their five-year average, according to data from the U.S. Energy Information Administration.
The gasoline oversupply has presented refiners with the unusual dilemma of whether to switch summer output towards distillates.
It is a mirror image of what happened with distillate products in the winter, when weak demand for diesel and heating oil left a big surplus in those products, and hammered independent refiners' earnings at a time when those products are normally in high use.
Typically, gasoline trades at a premium to diesel during the hot months of June, July and August. However, on Wednesday, gasoline's premium to diesel and heating oil 1RBc1-HOc1 fell to a mere one cent, down from a peak of 29 cents in early April.
"Gasoline is on the verge of trading under diesel... in JULY!!! That's insane," a trader at a U.S. bank said in an instant message.
The industry as a whole has been churning out gasoline hard for the past year, as a golden period of refining margins emerged out of the ashes of the crude oil rout.
A mild winter led to swelling distillate stockpiles, resulting in a rare winter occurrence where heating oil traded at a discount to gasoline, catching refiners off-guard at a time when they typically increase distillate production to meet high demand for heating oil. As a result, independent U.S. refiners reported their worst quarterly profits in five years in April.
With better margins for gasoline, refiners moved in that direction. Phillips 66 CEO Greg Garland said in an April earnings call that the company had been running "pretty much max gasoline," a point echoed by several other CEOs that month.
Despite strong demand, gasoline margins dipped in recent weeks as traders feared high imports and rising supply would make it harder to work through record inventories.
"Refiners killed the gasoline golden goose this year by overproducing. They were actually making summer gasoline during winter. That says it all," said Nevyn Nah, oil products analyst at Energy Aspects.
Earnings per share at top U.S. refiners, including Phillips 66, Valero and Marathon Petroleum, are expected to fall well short of analysts' expectations in the second quarter, according to StarMine, a unit of Thomson Reuters.
The surprise strength in diesel has again caught refiners off-guard. Prices of distillates, which include heating oil and diesel, have seen an unusual surge in recent weeks due to robust overseas demand combined with lower domestic production. Refinery strikes in France have also propelled prices forward.
"This (strong distillate demand) will continue to run into back end of June. We still see strong demand into July right now, so I think it may have an even longer bull run," an East Coast refining source said.
Seasonally, the last time gasoline traded at a discount to diesel was in 2013. If diesel's premium does return, refiners will likely make a switch, said Mark Broadbent, Wood Mackenzie's senior research analyst for refining and oil product markets.
Delta Air Lines Inc is currently considering pulling back the reins on gasoline output to boost diesel production, according to a source familiar with the plant's operations.
Others think it might not be the easiest or the best strategy to switch just yet. Gasoline is still the marquee product for the summer, said Tom Kloza, global head of energy analysis at OPIS.
"If I were in a refinery meeting in the next 60 days, there's no question I would say, 'Let's make as much gasoline as possible,'" said Kloza.
http://www.reuters.com/article/usa-refineries-gasoline-idUSL4N1904WT
"Someone said it takes 30 years to be an instant success" - Gabriel Barbier-Mueller, CEO of Harwood International
Recent DAL News
- Nike Shares Surge 7% Pre-Market as Elliott Hill Becomes CEO; FedEx Shares Tumble 13% After Profit Miss • IH Market News • 09/20/2024 10:02:58 AM
- Delta Air Lines Declares Quarterly Dividend • PR Newswire (US) • 09/19/2024 08:30:00 PM
- REGISTRATION OPENS SOON FOR AIRLINE DISTRIBUTION® 2025 • PR Newswire (US) • 09/17/2024 12:00:00 PM
- Intel Secures $3.5 Billion Subsidy, Stellantis Backs EU Emissions Targets, BP and Apollo Reach $1 Billion Deal • IH Market News • 09/16/2024 10:03:27 AM
- OpenAI Unveils Strawberry AI Model Series; Boeing Stock Falls 4% Amid Strike; HR Surges 20% on Growth Forecast • IH Market News • 09/13/2024 10:12:55 AM
- Form 8-K - Current report • Edgar (US Regulatory) • 09/12/2024 01:00:09 PM
- GameStop plunges 11% on stock offering, DJT drops post-debate, GSK fails shingles vaccine trial • IH Market News • 09/11/2024 10:25:41 AM
- Klarna partners with UATP to tap the $1 trillion air travel industry • PR Newswire (US) • 09/10/2024 12:00:00 PM
- Broadcom Down 10% Post-Earnings, UiPath Up 8%; Qualcomm Eyes Intel Assets; Salesforce Acquires Own Company • IH Market News • 09/06/2024 11:59:00 AM
- Delta Air Lines to Present at the Morgan Stanley Laguna Conference • PR Newswire (US) • 09/05/2024 01:00:00 PM
- Form N-PX - Annual Report of proxy voting record of management investment companies • Edgar (US Regulatory) • 08/30/2024 08:30:03 PM
- High Volatility Expected in Nvidia Report, Ambarella Soars 20%, Hertz Strengthens Board, Apple Cuts Jobs • IH Market News • 08/28/2024 09:50:36 AM
- W2 by GO7 joins the UATP Network as its Newest Issuer • PR Newswire (US) • 08/27/2024 12:00:00 PM
- IBM Closes China Research Division, Uber Fined $324M, Starliner to Return Without Astronauts • IH Market News • 08/26/2024 12:58:21 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 08/23/2024 01:15:08 PM
- Wego Joins UATP Network, Enhancing Supplier Relationships in MENA Region • PR Newswire (US) • 08/13/2024 12:00:00 PM
- TSMC July Revenue Surges 45%, Nasdaq Accelerates Penny Stock Delistings, Moody’s Downgrades Intel to BAA1, and More • IH Market News • 08/09/2024 09:44:44 AM
- Form 8-K - Current report • Edgar (US Regulatory) • 08/08/2024 07:00:37 PM
- Intel Sued by Shareholders; JPMorgan Raises Chance of Recession; Roblox Blocked in Turkey; Micron Resumes Share Buyback • IH Market News • 08/08/2024 09:48:43 AM
- Joby Aviation Seeks Australian Certification, Arcadium Lithium Projects Suspended Due to Oversupply, and More • IH Market News • 08/07/2024 09:47:32 AM
- CLEAR announces 4,000,000 block share repurchase agreement with Delta Airlines and $100 million increase to share repurchase authorization • PR Newswire (US) • 08/05/2024 10:00:00 AM
- Nvidia AI Chip Delays, Mars Eyes Kellanova Acquisition, Berkshire Hathaway’s Cash Surge to $277 Billion • IH Market News • 08/05/2024 09:43:55 AM
- Toyota Reports Another Global Production Decline, Delta Sues CrowdStrike, Meta Launches AI Studio for Custom Chatbots • IH Market News • 07/30/2024 10:00:51 AM
- Johnson Controls Division Sold for $8 Billion; Alphabet’s Offer Rejected by Wiz; AMD President Announces Retirement • IH Market News • 07/23/2024 10:00:52 AM
VHAI - Vocodia Partners with Leading Political Super PACs to Revolutionize Fundraising Efforts • VHAI • Sep 19, 2024 11:48 AM
Dear Cashmere Group Holding Co. AKA Swifty Global Signs Binding Letter of Intent to be Acquired by Signing Day Sports • DRCR • Sep 19, 2024 10:26 AM
HealthLynked Launches Virtual Urgent Care Through Partnership with Lyric Health. • HLYK • Sep 19, 2024 8:00 AM
Element79 Gold Corp. Appoints Kevin Arias as Advisor to the Board of Directors, Strengthening Strategic Leadership • ELMGF • Sep 18, 2024 10:29 AM
Mawson Finland Limited Further Expands the Known Mineralized Zones at Rajapalot: Palokas step-out drills 7 metres @ 9.1 g/t gold & 706 ppm cobalt • MFL • Sep 17, 2024 9:02 AM
PickleJar Announces Integration With OptCulture to Deliver Holistic Fan Experiences at Venue Point of Sale • PKLE • Sep 17, 2024 8:00 AM