US refineries: COVID-19 and hurricane season implications
The recent storm “was a good news, bad news scenario”: although seven refineries shut down as a precaution, the storm surge was less than anticipated. As a result, “it’s likely to be something of a minor blip” and the refineries should be able to restart quickly.
When asked about the hurricane’s impact on prices, the specialist responded that “in an odd way it helped the market a little bit to help to reduce the high inventory levels that have existed for both gas and diesel” as a result of coronavirus.
Indeed, the pandemic resulted in dramatically lower utilisation rates at refineries, creating an oversupplied market. In addition, the VP counted a number of refineries that have closed, or announced their closure – with some of the smaller facilities converting to produce renewable diesel.
However, this could also spell future trouble, owing to what the specialist called the “herd mentality” of this industry. Consequently, “the more that go into the renewable diesel market, they run the risk of over-saturating that market, and nobody achieving the margins that they might otherwise hoped to have gotten.”
Looking further ahead, the Interview covered when electric vehicles might start making a dent in refinery output. The presidential election is “probably the biggest issue” though, as a potential Biden administration would introduce uncertainty: “that’s a lot more problematic… they understand the direction, but not the specifics”.
To access all the human insights from Third Bridge Forum’s US Refining – Storm Impacts & Industry Outlook Interview, click here to view the full transcript.
The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.
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