While Midwest crude runs are not at record levels like the Gulf Coast, they also saw a sizable increase in recent weeks. A series of refinery outages hit the Midwest market in the middle of the second quarter, lowering crude oil runs to levels not seen since late 2010. As refiners returned from outages through June, Midwest runs ramped up steadily. This included the return of the Northern Tier St. Paul and Phillips 66 Wood River facilities. Additionally, trade press reports indicate BP ramped up production at its Whiting, Indiana, refinery to near full throttle of 405,000 bbl/d in June after the plant had been running at low rates for more than two years during the installation of a new coker designed to run heavy Canadian crude. While most of that refinery's distillation capacity is now on line, the coker is not expected to start up until later this year. In the meantime, the refinery is expected to satisfy its increased runs with light sweet crude. In sum, Midwest crude runs increased from 3.0 million bbl/d the week ending May 24 to more than 3.4 million bbl/d the week ending July 5.
Higher runs of light sweet crude at BP Whiting, and the seasonal increase in Midwest runs in general, are likely contributing to the recent narrowing of the Brent-WTI crude oil price spread to the lowest levels since late 2010. However, that spread has fallen below $3 per barrel recently, which has temporarily eroded some of Midwest refiners' competitive advantage. Earlier this week, with Brent priced at $109.29 per barrel and WTI at $105.88, the spread was $3.37. A narrower spread is likely to keep Midwest runs more muted than during times when the spread approached $30 per barrel and Midwest utilization neared maximum levels. But in the medium term, the Brent-WTI is likely to widen a bit from its current level. In the July Short-Term Energy Outlook, EIA projections have WTI's discount to Brent averaging $6.75 per barrel during the second half of 2013. While this projected spread is not as wide as at some points during the last two years, when combined with additions to upgrading capacity both in the Midwest and Gulf Coast that have increased the competitiveness of the U.S. refining base, it should generally make running crude profitable. In the current forecast, third-quarter crude runs average 15.5 million bbl/d, an increase of more than 200,000 bbl/d from both second-quarter 2013 and third-quarter 2012. Additionally, utilization rates on the Gulf Coast will likely drift downward from their current 94 percent with the arrival of autumn. While refiners can run at high rates and stress their operations for weeks or even months, utilization typically does not exceed about 90 percent over an extended period of time.