Despite seemingly unattractive crack spreads, refinery runs did post a steep rebound in the latest week, however, as West Coast and East Coast refining operations continued to recover from earlier unplanned outages and new capacity came on stream in the Gulf Coast. It has also helped that U.S. refineries in the Mid-Continent enjoy relatively low priced crude oil feedstock and exceptionally low natural gas prices, reducing their operating costs (which are largely driven by energy consumed in the refining process), thus padding their profit margins. With refinery inputs rising seasonally, product inventories, barring any further disruption in supply, seem likely to make up for lost time and may start rebuilding at a brisk pace, as sluggish demand growth compounds the effect of recovering production. Current indications point to a comfortable supply-demand balance in product markets through the summer, and a possibly challenging environment for margins.
A turning point for U.S. oil inventories?