Quarterly refining and marketing benchmarks: · PDF file10 January 2014 Quarterly refining and marketing benchmarks: with data through 4th quarter 2013 EY Knowledge Strategic Market

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

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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



2

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.



3

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.



4

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



5

$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



6

-$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



7

Spot product prices

Regular unleaded gasoline (RBOB)

Heating oil

Ultra low-sulfur diesel fuel

Low-sulfur residual fuel oil (1.0% S)



8

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




9

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



10

0

50

100

150

200

250

300

350

400

Spot ultra-low-sulfur dieselcents per gallon - weekly averages


0

50

100

150

200

250

300

350

Spot ultra-low-sulfur dieselcents per gallon - quarterly averages




11

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



12

Retail product prices

Motor gasoline (regular RFG)




13

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




14

100

150

200

250

300

350

400

450

500

Retail diesel fuel pricescents per gallon - including taxes - weekly avgs


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



15

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



16

$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



17

$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



18

$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



19

-$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



20

Notional refining margins


Number 2 distillate (heating oil/diesel fuel)



21

-$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


Midwest (Can hvy)


West Coast (ANS)



22

$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


Midwest (Can hvy)


West Coast (ANS)



23

Notional marketing margins





24

-$10

-$5

$0

$5

$10

$15

$20

$25

$30

$35

Gasoline marketing margins$ per barrel - weekly averages

East Coast Midwest


$0

$5

$10

$15

$20

$25

Gasoline marketing margins$ per barrel - quarterly averages




25

$0

$5

$10

$15

$20

$25

$30

Diesel marketing margins$ per barrel - weekly averages

East Coast Midwest


$0

$5

$10

$15

$20

$25

Diesel marketing margins$ per barrel - quarterly averages




26

International refining operations

Crude oil prices

Product prices – Northwest Europe

Product prices – Singapore

Cracking margins – Northwest Europe

Cracking margins – Singapore



27

$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



28

$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



29

$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



30

-$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)



31

$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

Documents

Quarterly refining and marketing benchmarks: · PDF file10 January 2014 Quarterly refining and marketing benchmarks: with data through 4th quarter 2013 EY Knowledge Strategic Market