Paris April 13 2022: In the wake of Russia’s invasion of Ukraine, oil markets have experienced “the most significant shock” since the early 1980’s, the IEA said.
One of the aftermaths has been a surge of products cracks and refining margins.
US Gulf Coast gasoline cracks surged past $30/b, “a mark that is usually breached only during hurricanes which trigger major refinery outages.”
NWE gasoline cracks rose “to record daily rates” at the end of March, whereas the diesel crack “leapt past historical record levels” on ICE gasoil futures expiry, and jet cracks “almost tripled” month on month in March.
Refinery margins also surged to “multiyear highs” in March “on exceptionally strong diesel and gasoline cracks.”
In Singapore, Dubai cracking margins hit a monthly average record, and in the Atlantic Basin were “only below” the levels registered during the 2008 and 2012 hurricane seasons, the International Energy Agency said.
US refiners responded to the higher margins by ramping up throughput, also boosted by stable domestic demand and increased exports “particularly as European importers sought to switch away from Russian products.”
In Europe, the growth rate is expected to reach 660,000 b/d this year “but there is a possible downside to this forecast in the event of a full ban on Russian feedstocks,” the IEA said, adding that Urals crude accounts for around 20% of OECD Europe refinery intake.
“A complete switch to other crudes by refiners that currently use Urals could cut European runs by up to 300,000 b/d due to constraints in downstream processing units such as light ends fractionation, hydrotreatment and heavy residue upgrading,” the report said.
A major earthquake shut some of Japan’s refineries, with run cuts likely in China “as refiners were faced with lower domestic demand due to a new wave of COVID lockdowns.”
In India, completion of refinery upgrades is expected to add 270,000 b/d total capacity by the end of the year, the IEA said.
Refineries currently undergoing expansion projects due for completion this and next year, include HPCL’s Vizag, IOC’s Barauni and Gujarat, according to S&P Global.
