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Quarterly refining and marketing benchmarks: with data through 4
th quarter 2013
10 January 2014
EY Knowledge
Strategic Market Intelligence
Quarterly refining and marketing benchmarks: 4Q 2013 Originally published: 10 January 2014 For further information, please contact: Foster Mellen at 910-833-8482, EY/Comm 4836356
Includes copyrighted material. Any use of this material, including reproduction or distribution, must comply with applicable copyright law, as well as Ernst & Young’s contractual obligations. Reproduction or reuse in excess of “fair use” may result in liability for copyright infringement. Please refer to Ernst & Young Client Confidentiality, Client Privacy and Knowledge-Sharing Policy (SCORE #CA7506) for additional guidance.
Warning The information contained in this report is dated material. Major events may have occurred since original publication that might alter the accuracy of the report.
Not intended for distribution to the external client. This report is not intended for distribution outside of Ernst & Young.
Confidential—for internal Ernst & Young use only © 2014 Ernst & Young LLP All rights reserved.
Confidential—All Rights Reserved Quarterly refining and marketing benchmarks: 4Q2013
© 2014 Ernst & Young LLP 10 January 2014
1
Introduction
This quarterly review is intended to provide audit/account teams with a broad understanding of the market for US and international refining and marketing operations, and to allow the teams to better understand the implications of changing prices for crude oil and refined petroleum products.
This review uses broad average prices, aggregated at both the national and regional level, and does not consider company-specific differences, nor differences between markets within a region. In terms of US product prices, benchmark prices for only unleaded regular reformulated gasoline are used, and where appropriate, distinctions are made between the two principal distillate products (i.e., heating oil and diesel fuel). Prices for low-sulfur residual fuel oil (1.0% S) are also presented.
The three key indicators of financial performance used in this analysis — cracking margins, refining margins and marketing margins — are merely simple constructs. The cracking margins calculated in this report are simply the differences between the revenues from product sales (using an assumed product yield) less the cost of the crude oil inputs. More specifically, the “3-2-1” margin represents the difference between the revenues from two barrels of spot gasoline plus one barrel of spot middle distillate less the cost of three barrels of spot crude oil (either an imported or domestic crude oil), all divided by three. The “6-3-2-1” margin used for the Midwest region represents the difference between the revenues from three barrels of spot gasoline plus two barrel of spot middle distillate, plus one spot barrel of residual fuel oil, less the cost of six barrels of spot crude oil (in this case, Canadian heavy blend), all divided by six. Similarly, the “5-3-1-1” margin for ANS on the West Coast represents the difference between the revenues from three barrels of spot gasoline plus one barrel of spot middle distillate, plus one spot barrel of residual fuel oil, less the cost of five barrels of spot crude oil (in this case, ANS crude oil), all divided by five.
Notional, simple refining margins are derived by subtracting crude prices from product revenues, with those revenues equal to the average spot or “wholesale” price of the product(s). Subtracting this same spot or wholesale price from the average retail price, excluding taxes, derives a notional, simple marketing margin. Notably, these notional margins are “gross” rather than “net,” in that they still include refining and marketing operating costs.
This review also presents for comparative purposes, information related to refining operations and margins in two notional international refining “centers,” Northwest Europe and Singapore.
Briefly summarizing the 4th quarter 2013 (4Q13):
Crude oil prices were generally down in the quarter, with WTI crude oil prices down by more than $8/bbl and averaging around $97/bbl in the quarter. UK Brent crude fell by more than $1/bbl and averaged about $109/bbl. Average prices for WTI crude were up compared to year-ago prices in 4Q12, but were down slightly for Brent. Notably, WTI and Canadian crude prices had “reconnected” with the more globally-traded crude oils in 3Q13, as much of structural/fundamental issues in the US Midwest were resolved and the large differentials observed over the last few years decreased. However, those
Confidential—All Rights Reserved Quarterly refining and marketing benchmarks: 4Q2013
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differentials widened back out in 4Q13, as the crude surplus shifted to the Gulf Coast as a result of the infrastructure additions. The average price differential between “light” and “heavy” crude oil continued to be very volatile over the quarter, but has generally returned back to near-normal levels. On average, the differential was up compared with last quarter, and up compared to 4Q12. But again, the sharply declining differential had largely been a function of the “disconnect” of WTI prices. Note that a high “light/heavy spread” adds to the advantage of refiners with extensive upgrading capabilities (i.e., those with the ability to process lower-quality, cheaper feedstock). A negative differential, such as we’ve had for the last two years or so, creates the opposite impact.
Spot product prices for gasoline were also volatile in the quarter, but were generally down for the quarter. Spot gasoline prices were down in each of the regions, and were below year-earlier levels, except in the Midwest. Spot heating oil prices were higher for the quarter on the East Coast, but down elsewhere. Spot low-sulfur diesel prices were down in each region. Distillate prices were also generally below year-ago prices. Spot residual fuel oil (RFO) prices were broadly unchanged for the quarter, but were down compared to a year-ago in each region.
Retail gasoline prices were down for the quarter in each region, and on average, retail
prices were also lower than 4Q12 in each of the regions. Average diesel retail prices were also down in each region compared to 3Q13 and were down compared to 4Q12.
Notional cracking margins as usual remained very volatile, in each of the four US refining centers, and for each crude oil used as input. On the East Coast, the 3-2-1 margin for Brent crude was down by more than $7/bbl on a quarterly basis, and margins in 4Q13 were well below year-earlier levels. On the Gulf Coast, quarterly 3-2-1 margins were down by almost $2/bbl for domestic LLS crude and down by more than $1/bbl for imported Maya crude. But compared to year-ago levels however, margins on LLS were higher and Maya margins were lower. In the Midwest, margins were down for 3-2-1 WTI, but up sharply for Canadian heavy, compared to last quarter. Margins were down compared to last year for WTI, but up for Canadian heavy. On the West Coast, margins were down by more than $1/bbl from 3Q13 for ANS crude, and margins were down compared to year-ago levels.
Notional gasoline refining margins in 4Q13 were down for the quarter in each of the regions, except in the Midwest using Canadian heavy crude. Similarly, margins were
down compared to year-ago, except in the Midwest. Notional distillate refining
margins were up from 3Q13 in each region. Compared to year-ago, distillate refining margins were down on East and West Coasts, but up on the Gulf Coast and in the Midwest.
As usual, notional marketing margins for both gasoline and diesel were also very volatile. With marketers not always passing through more than all of the spot price decreases, gasoline marketing margins were up compared to last quarter on the East and Gulf Coasts, but down in the Midwest and on the West Coast. Compared to 4Q12, gasoline marketing margins were down in each region. Distillate marketing margins were down on the East and Gulf Coasts compared to last quarter, but up elsewhere. Margins were above year-ago levels in the Midwest and West Coast, but down for the East and Gulf Coasts.
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International crude oil prices were slightly less volatile in the quarter, but on average
in the 4th quarter they were down in Europe but up slightly in Asia. International
product prices were mixed in the quarter, both in Europe and in Singapore. Notional
refining margins were down in 4Q13 in Northwest Europe, on a simple Brent basis, but were up slightly on a complex Brent basis and for Urals crude. Notional margins in Singapore were also down, both for Dubai crude oil and for Saudi Heavy. Compared to year-ago, margins in Northwest Europe were down on a simple and complex Brent as well as Urals basis. Similarly, margins in Singapore were both below year-earlier levels.
The format of this review is primarily graphical. The actual data, in spreadsheet or tabular format, are also readily available upon request. All data presented here are derived from the US Department of Energy, Energy Information Administration, and from Thomson/Reuters.
For further information or clarification, please contact: Foster Mellen at (910) 833-8482; EY Comm 4836356.
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© 2014 Ernst & Young LLP 10 January 2014
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Crude oil prices
West Texas Intermediate (WTI)
Louisiana Light Sweet (LLS)
Alaskan North Slope (ANS)
UK Brent
Mexican Maya
Canadian Heavy Blend
Light/Heavy differentials
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$0
$20
$40
$60
$80
$100
$120
$140
North American crude oil prices$ per barrel - weekly averages
LLS
Brent
WTI
Maya
ANS
Can hvy blend
$0
$20
$40
$60
$80
$100
$120
$140
Average crude oil prices$ per barrel - quarterly averages
LLS
Brent
WTI
Maya
ANS
Can hvy
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-$20
-$15
-$10
-$5
$0
$5
$10
$15
$20
$25
Light/heavy differential:WTI less Maya$ per barrel - weekly averages
-$12
-$9
-$6
-$3
$0
$3
$6
$9
$12
$15
$18
$21
$24
Light/heavy differential: WTI less Maya$ per barrel - quarterly averages
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Spot product prices
Regular unleaded gasoline (RBOB)
Heating oil
Ultra low-sulfur diesel fuel
Low-sulfur residual fuel oil (1.0% S)
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0
50
100
150
200
250
300
350
400
Spot gasoline: regular RBOBcents per gallon - weekly averages
NY Gulf Coast Chicago LA
0
50
100
150
200
250
300
350
Spot gasoline: regular RBOBcents per gallon - quarterly averages
NY Gulf Coast Chicago LA
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0
50
100
150
200
250
300
350
400
Spot heating oilcents per gallon - weekly averages
NY Gulf Coast Chicago
0
50
100
150
200
250
300
350
Spot heating oilcents per gallon - quarterly averages
NY Gulf Coast Chicago
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0
50
100
150
200
250
300
350
400
Spot ultra-low-sulfur dieselcents per gallon - weekly averages
NY Gulf Coast Chicago LA
0
50
100
150
200
250
300
350
Spot ultra-low-sulfur dieselcents per gallon - quarterly averages
NY Gulf Coast Chicago LA
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0
50
100
150
200
250
300
350
Spot low-sulfur residual fuel oil (1.0% S)cents per gallon - weekly averages
NY Gulf Cst LA
0
50
100
150
200
250
300
350
Spot low-sulfur residual fuel oil (1.0% S)cents per gallon - quarterly averages
NY Gulf Cst LA
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Retail product prices
Motor gasoline (regular RFG)
Ultra low-sulfur diesel fuel
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100
150
200
250
300
350
400
450
500
Retail gasoline prices: regular RFGcents per gallon - including taxes - weekly avgs
East Coast Midwest Gulf Coast West Coast
0
50
100
150
200
250
300
350
400
450
Retail gasoline prices: regular RFGcents per gallon - including taxes - quarterly averages
East Coast Midwest Gulf Coast West Coast
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100
150
200
250
300
350
400
450
500
Retail diesel fuel pricescents per gallon - including taxes - weekly avgs
East Coast Midwest Gulf Coast West Coast
0
50
100
150
200
250
300
350
400
450
Retail diesel fuel pricescents per gallon - including taxes - quarterly averages
East Coast Midwest
Gulf Coast West Coast
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Notional cracking margins
East Coast cracking margins
3-2-1 Brent
Gulf Coast cracking margins
3-2-1 LLS
3-2-1 Maya
Midwest cracking margins
3-2-1 WTI
6-3-2-1 Canadian heavy blend
West Coast cracking margins
5-3-1-1 ANS
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$0
$5
$10
$15
$20
$25
$30
East Coast cracking margins$ per barrel - weekly averages
3-2-1 crack spread - Brent crude
$0
$5
$10
$15
$20
$25
East Coast cracking margins$ per barrel - quarterly averages
3-2-1 crack spread - Brent crude
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$0
$5
$10
$15
$20
$25
$30
$35
Gulf Coast cracking margins$ per barrel - weekly averages
321-LLS 321-Maya
$0
$5
$10
$15
$20
$25
$30
Gulf Coast cracking margins$ per barrel - quarterly averages
321: LLS 321: Maya
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$0
$10
$20
$30
$40
$50
$60
$70
Midwest cracking margins$ per barrel - weekly averages
321: WTI 6321: Can hvy
$0
$10
$20
$30
$40
$50
$60
Midwest cracking margins$ per barrel - quarterly averages
321: WTI 6321: Can hvy
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-$5
$0
$5
$10
$15
$20
$25
$30
$35
$40
West Coast cracking margins$ per barrel - weekly averages
5311 - ANS
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
West Coast cracking margins$ per barrel - quarterly averages
5311: ANS
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Notional refining margins
Motor gasoline (regular RFG)
Number 2 distillate (heating oil/diesel fuel)
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-$20
-$10
$0
$10
$20
$30
$40
$50
$60
$70
Gasoline refining margins$ per barrel - weekly averages
East Coast (Brent crude)
Midwest (Can hvy)
Gulf Coast (LLS crude)
West Coast (ANS)
-$10
$0
$10
$20
$30
$40
$50
Gasoline refining margins$ per barrel - quarterly averages
East Coast (Brent crude)
Midwest (Can hvy)
Gulf Coast (LLS crude)
West Coast (ANS)
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$0
$10
$20
$30
$40
$50
$60
$70
$80
Distillate refining margins$ per barrel - weekly averages
East Coast (Brent crude)Midwest (Can hvy)Gulf Coast (LLS crude)West Coast (ANS)
$0
$10
$20
$30
$40
$50
$60
$70
Distillate refining margins$ per barrel - quarterly averages
East Coast (Brent crude)
Midwest (Can hvy)
Gulf Coast (LLS crude)
West Coast (ANS)
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Notional marketing margins
Motor gasoline (regular RFG)
Ultra low-sulfur diesel fuel
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-$10
-$5
$0
$5
$10
$15
$20
$25
$30
$35
Gasoline marketing margins$ per barrel - weekly averages
East Coast Midwest
Gulf Coast West Coast
$0
$5
$10
$15
$20
$25
Gasoline marketing margins$ per barrel - quarterly averages
East Coast Midwest Gulf Coast West Coast
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$0
$5
$10
$15
$20
$25
$30
Diesel marketing margins$ per barrel - weekly averages
East Coast Midwest
Gulf Coast West Coast
$0
$5
$10
$15
$20
$25
Diesel marketing margins$ per barrel - quarterly averages
East Coast Midwest Gulf Coast West Coast
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International refining operations
Crude oil prices
Product prices – Northwest Europe
Product prices – Singapore
Cracking margins – Northwest Europe
Cracking margins – Singapore
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$0
$20
$40
$60
$80
$100
$120
$140
$160
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
International spot crude oil prices(US$/bbl - weekly averages)
Brent Urals Dubai Arab Hvy
$0
$20
$40
$60
$80
$100
$120
$140
1Q
03
2Q
03
3Q
03
4Q
03
1Q
04
2Q
04
3Q
04
4Q
04
1Q
05
2Q
05
3Q
05
4Q
05
1Q
06
2Q
06
3Q
06
4Q
06
1Q
07
2Q
07
3Q
07
4Q
07
1Q
08
2Q
08
3Q
08
4Q
08
1Q
09
2Q
09
3Q
09
4Q
09
1Q
10
2Q
10
3Q
10
4Q
10
1Q
11
2Q
11
3Q
11
4Q
11
1Q
12
2Q
12
3Q
12
4Q
12
1Q
13
2Q
13
3Q
13
4Q
13
International spot crude oil prices(US$/bbl - quarterly averages)
Brent Urals Dubai Arab Hvy
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$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Northwest Europe spot product prices(US$/bbl - weekly averages)
gasoline gasoil RFO
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
1Q
03
2Q
03
3Q
03
4Q
03
1Q
04
2Q
04
3Q
04
4Q
04
1Q
05
2Q
05
3Q
05
4Q
05
1Q
06
2Q
06
3Q
06
4Q
06
1Q
07
2Q
07
3Q
07
4Q
07
1Q
08
2Q
08
3Q
08
4Q
08
1Q
09
2Q
09
3Q
09
4Q
09
1Q
10
2Q
10
3Q
10
4Q
10
1Q
11
2Q
11
3Q
11
4Q
11
1Q
12
2Q
12
3Q
12
4Q
12
1Q
13
2Q
13
3Q
13
4Q
13
Northwest Europe spot product prices(US$/bbl - quarterly averages)
gasoline gasoil RFO
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$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Singapore spot product prices(US$/bbl - weekly averages)
gasoline gasoil RFO
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
1Q
03
2Q
03
3Q
03
4Q
03
1Q
04
2Q
04
3Q
04
4Q
04
1Q
05
2Q
05
3Q
05
4Q
05
1Q
06
2Q
06
3Q
06
4Q
06
1Q
07
2Q
07
3Q
07
4Q
07
1Q
08
2Q
08
3Q
08
4Q
08
1Q
09
2Q
09
3Q
09
4Q
09
1Q
10
2Q
10
3Q
10
4Q
10
1Q
11
2Q
11
3Q
11
4Q
11
1Q
12
2Q
12
3Q
12
4Q
12
1Q
13
2Q
13
3Q
13
4Q
13
Singapore spot product prices(US$/bbl - quarterly averages)
gasoline gasoil RFO
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-$6
-$3
$0
$3
$6
$9
$12
$15
$18
$21
$24
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
US
$/b
bl
NW Europe notional refining margins(weekly averages)
Brent (3-1-1-1)
Urals (4-1-2-1)
Brent (20-6-11-3)
-$5
$0
$5
$10
$15
$20
1Q
03
2Q
03
3Q
03
4Q
03
1Q
04
2Q
04
3Q
04
4Q
04
1Q
05
2Q
05
3Q
05
4Q
05
1Q
06
2Q
06
3Q
06
4Q
06
1Q
07
2Q
07
3Q
07
4Q
07
1Q
08
2Q
08
3Q
08
4Q
08
1Q
09
2Q
09
3Q
09
4Q
09
1Q
10
2Q
10
3Q
10
4Q
10
1Q
11
2Q
11
3Q
11
4Q
11
1Q
12
2Q
12
3Q
12
4Q
12
1Q
13
2Q
13
3Q
13
4Q
13
NW Europe notional refining margins(US$/bbl - quarterly averages)
Brent (3-1-1-1)
Urals (4-1-2-1)
Brent (20-6-11-3)
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$0
$3
$6
$9
$12
$15
$18
$21
$24
$27
$30
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
US
$ p
er
bb
lSingapore notional refining margins
(weekly averages)
Dubai 6-2-3-1
Arab Hvy 6-2-3-1
$0
$3
$6
$9
$12
$15
$18
$21
$24
1Q
03
2Q
03
3Q
03
4Q
03
1Q
04
2Q
04
3Q
04
4Q
04
1Q
05
2Q
05
3Q
05
4Q
05
1Q
06
2Q
06
3Q
06
4Q
06
1Q
07
2Q
07
3Q
07
4Q
07
1Q
08
2Q
08
3Q
08
4Q
08
1Q
09
2Q
09
3Q
09
4Q
09
1Q
10
2Q
10
3Q
10
4Q
10
1Q
11
2Q
11
3Q
11
4Q
11
1Q
12
2Q
12
3Q
12
4Q
12
1Q
13
2Q
13
3Q
13
4Q
13
Singapore notional refining margins(US$/bbl - quarterly averages)
Dubai 6-2-3-1
Arab Hvy 6-2-3-1