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PBF Energy sees jet fuel demand capping industry-wide refinery runs

August 03/2020

MOSCOW (MRC) -- Depressed demand for jet fuel could cap refinery utilization rates across the entire industry, according to executives at PBF Energy, the fourth-largest U.S. oil refiner by capacity, said Hydrocarbonprocessing.

Demand for gasoline and distillates has recovered by 80% to 90% since the worst of the coronavirus pandemic, but jet fuel demand has only rebounded 30%, according to the Energy Information Administration. Because refineries cannot make products like diesel without producing jet fuel as well, they will restrain output, PBF Chief Executive Thomas Nimbley said on Friday.

"I'm not convinced that we could get to full utilization in this industry if jet demand is where it is today," Chief Executive Thomas Nimbley said on an earnings call. Running refineries at full tilt would reduce the ability for refiners to contain the production of jet fuel.

Other independent U.S. refiners are running near 80% utilization, but PBF is still operating below that and will continue to do so until it sees demand return in key markets, Nimbley said.

Executives defended the company's acquisition of Shell's refinery in Martinez, California, despite reporting gross margins of only USD1 million in the second quarter in the West Coast.

"We had negative cracks in April, which severely impacted our earnings on the West Coast," Nimbley said. Gasoline demand rebounded in recent weeks in California, he said, and physical crack spreads were approximately USD13 in San Francisco and Los Angeles earlier this week.

Nimbley disagreed with the idea that California has too much refinery capacity. "I think we're going to be fine in California over the long haul," he said. However, he noted that the pandemic will result in a permanent reduction in U.S. refining capacity.

As MRC informed earlier, PBF Energy, the fourth-largest U.S. oil refiner by capacity, is holding processing near 70% of throughput even as more states relax stay-at-home orders, boosting demand for motor fuel. The gasoline crack spread RBc1-CLc1, which drifted negative in March as the coronavirus pandemic sharply cut air and road travel, has recovered to USD11.42 per barrel this week. However, fuel demand is off 23% in the United States over the last four weeks.

As MRC informed previously, global oil consumption cut by up to a third in Q1 2020. What happens next in the oil market depends on how quickly and completely the global economy emerges from lockdown, and whether the recessionary hit lingers through the rest of this year and into 2021.

Earlier this year, BP said the deadly coronavirus outbreak could cut global oil demand growth by 40 per cent in 2020, putting pressure on Opec producers and Russia to curb supplies to keep prices in check.

And in September 2019, six world's major petrochemical companies in Flanders, Belgium, North Rhine-Westphalia, Germany, and the Netherlands (Trilateral Region) announced the creation of a consortium to jointly investigate how naphtha or gas steam crackers could be operated using renewable electricity instead of fossil fuels. The Cracker of the Future consortium, which includes BASF, Borealis, BP, LyondellBasell, SABIC and Total, aims to produce base chemicals while also significantly reducing carbon emissions. The companies agreed to invest in R&D and knowledge sharing as they assess the possibility of transitioning their base chemical production to renewable electricity.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.


mrcplast.com
Author:Anna Larionova
Tags:petroleum products, crude oil, PP, PE, ethylene, propylene, petrochemistry.
Category:General News
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