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Ida's Impact Spells Large Product Losses

Copyright © 2021 Energy Intelligence Group
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Hurricane Ida’s impact on refineries along the US Gulf Coast will have long-lasting effects on the market for refined products.

Energy Intelligence estimates over 20 million barrels of products have gone unproduced as a result of Ida to date, and that outages associated with the storm and the subsequent restart of most facilities will raise that to at least 30 million bbl. Persistent outages at Phillips 66’s Alliance and Royal Dutch Shell’s Norco refineries are adding roughly 3.2 million bbl per week to that figure.

Those are the only two refineries in the region that have yet to restart. However, restarting a refinery is not a quick process. As a rule of thumb, Energy Intelligence estimates utilization during restart procedures at 60% in the first week, 75% in the second and 85% during the third.

The impacts of outages and restarts come alongside regular seasonal maintenance, which one source estimated would knock at roughly 1 million barrels per day off line in September prior to Hurricane Ida's impact. That means inventory draws are likely even as the peak demand season for gasoline ends, a dynamic that could prove supportive for refinery margins but also translate to higher prices for fuels.

Refinery Outages
RefineryCapacity ('000 b/d)Days Before Commencing Restart
XOM Baton Rouge5002
MPC Garyville5656
PBF Chalmette19013
VLO Meraux13517
VLO St Charles21517
PSX Alliance25518
Shell Norco25018
Total2,110

Squeeze

However, margins face pressure from rising crude costs that are also associated with Hurricane Ida. In a reversal of typical trends, production outages proved to be more persistent than that among many refiners, leading to a tighter regional crude market.

Production of medium, sour Gulf Coast staple Mars crude has experienced significant disruption, and the US federal government has had to repeatedly engage in crude exchanges with refiners .

Crude imports faced challenges as well, with the Louisiana Offshore Oil Port (Loop) going off line for days due to the storm and some other ports in the region dealing with restrictions for weeks.

Energy Intelligence’s refining model shows a complex refinery along the US Gulf Coast running an incremental barrel of Mars netted a margin of $13.68 as of Sep. 10, down from over $16 the week prior but over $2 above the same time in 2019, prior to the Covid-19 pandemic.

Storm-related impacts are also following a slew of refinery closures, attempted sales, and conversions to produce renewable fuels — the US has lost over 1 million b/d of throughput capacity since the middle of 2019.

Breakdown

Refiners on the US Gulf Coast were producing more jet fuel and liquefied petroleum gasses (LPG) than in many other regions, according to data from the US Energy Information Administration (EIA), but yields were still skewed toward gasoline.

Energy Intelligence analysis suggests the market has lost out on over 10 million bbl of gasoline production since Ida struck, along with at least 6.5 million bbl of distillate fuel oils such as diesel and heating oil, 1.7 million bbl of jet fuel, and 1.2 million bbl of LPG such as propane.

Distillate and propane losses come just ahead of the crop drying and heating seasons, when demand for those products tends to rise.

The propane market was already painfully tight prior to Ida’s landfall — EIA data show inventories are currently 26.3% lower than they were at the same time in 2020.

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