U.S. oil refiners aim to run full bore, spurning recession fears

The Valero refinery next to the Houston Ship Channel is seen in Houston, Texas, U.S., May 5, 2019. REUTERS/Loren Elliott//File Photo

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HOUSTON, Aug 18 (Reuters) – U.S. crude oil refineries expect to continue operating at full capacity this quarter, according to executives and estimates, as refiners put aside worries about the recession and lower oil prices. detail to provide more fuel.

Operating levels will keep U.S. gasoline prices below their spring highs while providing strong profits for refiners, analysts said. Many are aiming to operate at rates similar to Q2’s average 94% utilization rate.

“Refiners will continue to work hard in the third quarter,” Matthew Blair, refining analyst at Tudor, Pickering, Holt, said in a note this week, adding that he wouldn’t be surprised “if third-quarter runs don’t were no higher” than in June given past conservative forecasts.

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The largest refiner by capacity, Marathon Petroleum Corp (MPC.N), aims to operate at 97% of its capacity of 2.9 million barrels per date with revisions slightly reducing production. Its 13 factories operated at an average rate of 100% last quarter.

Valero Energy (VLO.N), the second-largest by capacity, plans to operate its 2.2 million bpd system at 90% to 93% capacity, down slightly from the second-largest 94% trimester.

STRONG DEMAND

“There’s really no indication of demand destruction,” Gary Simmons, executive vice president of Valero, said on a call with investors, explaining the decision to keep rates high.

Chevron (CVX.N) said it would not disclose the refinery’s operating goals. Exxon Mobil (XOM.N) did not respond to a request for comment. Citgo Petroleum, which was operating its three U.S. refineries at 101% of their combined capacity of 769,000 bpd last quarter, said it was not releasing forward guidance.

Historically, US production peaks in the second or third quarter when the summer driving season draws to a close and companies begin equipment overhauls in the fall.

U.S. refineries have been operating at record levels this year due to plant shutdowns, a rapid recovery in domestic demand and strong export demand following Russia’s invasion of Ukraine. Low U.S. gasoline and diesel inventories have raised fears of diesel shortages as the winter heating season attracts more distillates.

U.S. gasoline inventories were nearly 24 days of supply last week, down from the pandemic peak of 48.7 days in 2020. Diesel inventories were 29.4 days, down from the peak of 54.3 days in 2020, according to government data.

Third quarter guidance does not incorporate any impact from the Atlantic hurricane season, which is now heading into its peak period. Plants along the U.S. Gulf Coast account for more than 47% of the country’s refining capacity and are the most exposed to disruption from storms. Planned maintenance usually begins in the third quarter.

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Reporting by Erwin Seba; Editing by Leslie Adler

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