November 14, 2024 [Reuters]- U.S. refiner margins for gasoline and diesel will be relatively unchanged next year, the U.S. Energy Information Administration said on Wednesday, signaling relief for fuel producers who saw profits slump sharply since 2022 on slowing demand growth.
Refiners around the world reaped record profits in 2021 and 2022 from the post-pandemic surge in travel demand and recovering economic activity. However, margins then dropped sharply as mammoth new plants opened up around the world and demand growth slowed, partly due to efforts to transition away from fossil fuels.
The planned closures of two U.S. refineries next year – LyondellBasell Industries’ 263,776 barrel-per-day Houston refinery and Phillips 66’s 139,000-bpd Los Angeles refinery – will help stop the slump in margins for plants that remain, the EIA said in its November Short-Term Energy Outlook.
The closures will reduce U.S. refining capacity to 17.94 million barrels per day by the end of next year, the lowest since June 2022, according to EIA data. Capacity had grown over the past two years.
Higher demand for gasoline and diesel in the United States will also help refiner margins improve next year, the agency said.
The 3-2-1 crack spread, an industry metric used to assess refiners’ margins on both gasoline and diesel put together, slumped to around $17 per barrel as of Wednesday, down from $60 per barrel in June 2022 – the highest in LSEG records going back to 2002 .
The EIA on Wednesday lifted its forecast for this year’s U.S. gasoline consumption to 8.94 million bpd, same as last year, compared to its earlier view that demand will fall this year to 8.91 million bpd.
The agency also raised this year’s demand forecasts for distillate fuel oil, which includes diesel and heating oil, and for jet fuel.
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