Refining margins hit multi-year high

Refining margins, the crack spread of Nymex gasoline, were trading above $ 16 a barrel on Thursday, their highest level since 2017, Bloomberg said Thursday.

The crack spread is the difference between the price of crude oil and the price of refined products, which include gasoline, distillates, diesel, and jet fuel.

Although the price of crude oil continues to rise, which increases input costs for refiners, the prices of refined products have increased further, which has widened the spread and strengthened the bottom line for refiners.

Refiners had a tough year last year when crack spreads were unusually tight. But now high gasoline prices and low inventories are looking for refiners, supported in part by refinery maintenance and a handful of refinery breakdowns.

But demand for refined products – gasoline in particular – has exceeded pre-pandemic levels in some places, including Italy, Bloomberg said Thursday. In the United States, the world’s largest consumer of fuel, gasoline and distillate consumption has now rebounded within the five-year average range, Reuters reported last week.

Demand for refined products in the United States is now higher than it was this time around in 2019, although demand for jet fuel continues to lag.

According to Bloomberg, the widening of the gap indicates strong demand for oil, with refiners processing more fuel, as coal and natural gas are scarce in Europe and Asia.

President Joe Biden warned last week that high gasoline prices will persist into the next year, when he blamed those high prices on OPEC’s production cut policies.

If the White House is right, refiners can profit from higher crack spreads until then.

Refiners are expected to post higher profits for the third quarter thanks to these higher crack spreads, according to Reuters.

By Julianne Geiger for OilUSD

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