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Released November 29, 2018 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--U.S. gasoline-refining margins have been on a downward trend since August, according to the U.S. Energy Information Administration (EIA), as refinery outputs have risen and domestic gasoline demand has flattened. But distillate demand has grown rapidly over the same period, indicating refiners might choose to maximize diesel fuel production over gasoline. Industrial Info is tracking more than $4.5 billion in active refining-related projects that are set to begin construction in the first quarter of 2019.
Refiners along the East and Gulf coasts are reporting low or negative gasoline-refining margins. But, as the EIA points out, crude oil processed at U.S. refineries typically yields about twice as much gasoline as distillate fuels, so refiners cannot simply put the brakes on gasoline production. Nonetheless, the high demand for distillates and the low demand for gasoline add up to higher gasoline inventory levels--higher than their recent five-year range since mid-August.
Click on an image at right for an EIA graph indicating U.S. distillate inventories and gasoline margins based on wholesale prices at New York Harbor.
Among the projects set to begin construction in first-quarter 2019 is Marathon Petroleum Corporation's (NYSE:MPC) (Findlay, Ohio) $500 million crude unit expansion at the Galveston Bay Refinery in Texas City, Texas, which will add about 40,000 barrels per day (BBL/d) of distillate capacity. For more information, see Industrial Info's project report.
"We believe current distillate trends, combined with the impact of changing IMO regulations around sulfur content, will support strong distillate demand well into the future, and we are well positioned given the investments we have made in our business over the last decade," said Gary Heminger, the chief executive officer of Marathon Petroleum, in a recent earnings-related conference call.
Royal Dutch Shell (NYSE:RDS.A) (The Hague, Netherlands) hopes to increase diesel yields with a $10 million upgrade of Unit 3 at its refinery in Convent, Louisiana. The 30,000-BBL/d diesel hydrotreater will see a new catalyst and a modification of its fractionation column. For more information, see Industrial Info's project report.
High levels of U.S. gasoline production in 2018 have outpaced consumption, leading to average inventories in November that are 14.8 million barrels higher than at the same time in 2017, according to the EIA. But this hasn't stopped some companies from expanding gasoline-production capacity: Valero Energy Corporation (NYSE:VLO) (San Antonio, Texas) is kicking off a $400 million addition at its Saint Charles Refinery in Norco, Louisiana, next quarter, which will produce 25,000 BBL/d of sulfuric acid alkylate from fluid catalytic cracker-derived olefin feedstocks, to increase octane blending in the facility's gasoline pool. For more information, see Industrial Info's project report.
"The real surprise, especially on the gasoline side is just very high refinery utilization," said Gary Simmons, the chief executive officer of Valero, in a recent earnings-related conference call. "And year-to-date, we've averaged 93% refinery utilization, 2.6% higher than where we were last year. With that increase in refinery utilization, gasoline production is up about 2% over where it was last year. And even though you've had an increase in demand, you've had an about 2-to-1 increase in production over demand, and it's caused a surplus in the inventory build."
But Simmons was quick to point to some positive signs for the gasoline market: "We've seen very good gasoline exports. In the last three weeks in a row, we've averaged about 1 million barrels a day of gasoline being exported. In our system, we're seeing very strong South American demand."
Valero and Shell also are among the companies set to begin upgrades on gasoline-production units next quarter. Valero is preparing for a $20 million upgrade to Unit 3 at its refinery in Texas City, which will reduce sulfur content in the 60,000-BBL/d gasoline desulfurizer to meet proposed Tier 3 gasoline regulations, while Shell is preparing for a $12 million fluid catalytic cracker unit (FCCU) upgrade and a $10 million gasoline hydrotreater unit upgrade at its Puget Sound Refinery in Anacortes, Washington. For more information, see Industrial Info's reports on the Valero Unit 3, Shell FCCU and Shell hydrotreater projects.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
Refiners along the East and Gulf coasts are reporting low or negative gasoline-refining margins. But, as the EIA points out, crude oil processed at U.S. refineries typically yields about twice as much gasoline as distillate fuels, so refiners cannot simply put the brakes on gasoline production. Nonetheless, the high demand for distillates and the low demand for gasoline add up to higher gasoline inventory levels--higher than their recent five-year range since mid-August.
Click on an image at right for an EIA graph indicating U.S. distillate inventories and gasoline margins based on wholesale prices at New York Harbor.Among the projects set to begin construction in first-quarter 2019 is Marathon Petroleum Corporation's (NYSE:MPC) (Findlay, Ohio) $500 million crude unit expansion at the Galveston Bay Refinery in Texas City, Texas, which will add about 40,000 barrels per day (BBL/d) of distillate capacity. For more information, see Industrial Info's project report.
"We believe current distillate trends, combined with the impact of changing IMO regulations around sulfur content, will support strong distillate demand well into the future, and we are well positioned given the investments we have made in our business over the last decade," said Gary Heminger, the chief executive officer of Marathon Petroleum, in a recent earnings-related conference call.
Royal Dutch Shell (NYSE:RDS.A) (The Hague, Netherlands) hopes to increase diesel yields with a $10 million upgrade of Unit 3 at its refinery in Convent, Louisiana. The 30,000-BBL/d diesel hydrotreater will see a new catalyst and a modification of its fractionation column. For more information, see Industrial Info's project report.
High levels of U.S. gasoline production in 2018 have outpaced consumption, leading to average inventories in November that are 14.8 million barrels higher than at the same time in 2017, according to the EIA. But this hasn't stopped some companies from expanding gasoline-production capacity: Valero Energy Corporation (NYSE:VLO) (San Antonio, Texas) is kicking off a $400 million addition at its Saint Charles Refinery in Norco, Louisiana, next quarter, which will produce 25,000 BBL/d of sulfuric acid alkylate from fluid catalytic cracker-derived olefin feedstocks, to increase octane blending in the facility's gasoline pool. For more information, see Industrial Info's project report.
"The real surprise, especially on the gasoline side is just very high refinery utilization," said Gary Simmons, the chief executive officer of Valero, in a recent earnings-related conference call. "And year-to-date, we've averaged 93% refinery utilization, 2.6% higher than where we were last year. With that increase in refinery utilization, gasoline production is up about 2% over where it was last year. And even though you've had an increase in demand, you've had an about 2-to-1 increase in production over demand, and it's caused a surplus in the inventory build."
But Simmons was quick to point to some positive signs for the gasoline market: "We've seen very good gasoline exports. In the last three weeks in a row, we've averaged about 1 million barrels a day of gasoline being exported. In our system, we're seeing very strong South American demand."
Valero and Shell also are among the companies set to begin upgrades on gasoline-production units next quarter. Valero is preparing for a $20 million upgrade to Unit 3 at its refinery in Texas City, which will reduce sulfur content in the 60,000-BBL/d gasoline desulfurizer to meet proposed Tier 3 gasoline regulations, while Shell is preparing for a $12 million fluid catalytic cracker unit (FCCU) upgrade and a $10 million gasoline hydrotreater unit upgrade at its Puget Sound Refinery in Anacortes, Washington. For more information, see Industrial Info's reports on the Valero Unit 3, Shell FCCU and Shell hydrotreater projects.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
