Some of the leading U.S. refiners anticipate impacts on the supply of refined fuels related to some plant maintenances mostly concentrated in the first half of 2023, as the Covid-19 pandemic continues to affect fuel markets for yet another year.

Image courtesy of Rudy and Peter Skitterians, Pixabay.

×

Refinery maintenance work will be carried out in some U.S. locations. Some planned maintenance has been described as the last stretch of work postponed in 2020 and 2021, a period marked by tight labor and materials availability related to the Covid-19 pandemic.

As of the start of February, U.S. refining executives appear to see profit margins improving but overall not being repeatable in relation to 2022, a very good year for refiners like ExxonMobil that enjoyed some of the best results since its merger over two decades ago.

Both motor gasoline and distillate fuel inventories are at levels way below their five-year average, 7% and 17% down, respectively, the Energy Information Administration (EIA) published on Jan. 27, 2023 along with its Weekly Petroleum Status Reports.

U.S. gasoline demand below 2019

According to the CEO of Chevron, Mike Wirth, gasoline demand is still below what it was in 2019.

“Overall (…) gasoline demand, I'll start there, still just a touch below pre-pandemic levels. You know, fourth quarter of 2022 maybe 2% or 3% below fourth quarter of 2019. If you look at diesel, demand is pretty flat versus pre-pandemic,” Wirth said, according to a transcript of the call by Motley Fool. Jet is “recovering, but still below” 2019, he added.

According to the Summary of Weekly Petroleum Data for the week ending January 27, 2023, released by the EIA, refineries operated at 85.7% of their operable capacity in the week before the publication of the report.

Echoes of Covid-19 in 2023

“What you do see across the U.S., and I think in some of the other markets, are two things that are really kind of still echoes of Covid. One is you're just seeing capacity go out of the system. And two, you see maintenance that was deferred during Covid (…) had to be rescheduled and re-planned,” said Mike Wirth, CEO of Chevron, according to the Motley Fool transcript.

Deferred maintenance as a result of Covid was projected to impact production as far back as August 2020. Experts at the time projected during a Reuters Events conference that both labor and material limitation would likely impact planned maintenance for the next three years. Maintenance helps prevent unscheduled shutdowns and other emergencies. Turnaround work can only be deferred to a point.

“And so there's probably still a bit of a bow wave of pushing through the system in some places of activity that needs to get done for, you know, safety and reliability and regulatory reasons,” Wirth added.

Some turnarounds planned

Chevron, based in San Ramon, California, is a partner with Phillips 66, another American refiner based in Houston, in the venture Chevron Phillips Chemical. Phillips 66 is one company that has planned maintenance for 2023.

According to comments by Mark Lashier, president and chief operating officer of Phillips 66, the company’s turnaround guidance for the year is as high as $600 million.

“Our annual guidance is in the $550 million to $600 million range. And our first quarter is a majority of that spend. So, we are heavy centric first quarter on our turnaround (…) although there is a heavy spend, it's centric really in one primary facility,” he said.

Full recovery in 2023

Brian Partee, senior vice president at Marathon, said during the company’s fourth quarter 2022 earnings discussion that was held on Jan. 31, 2023 that there was more demand for gasoline, jet fuel, diesel in October-December 2022 compared with the previous year.

“What we found in Q4, gasoline year on year, 2% (…) Diesel was up 4%, and jet was up 3% on year-to-year basis,” said Brian Partee, according to a transcript of the call by Motley Fool.

“We expect to see full recovery domestically here as we progress through 2023,” added Partee, from the Findlay,Ohio-based company.

Gasoline inventories increased by 2.6 million barrels in late January from the previous week and were about 7% below the five year average for late January, the EIA said.

Distillate fuel inventories increased by 2.3 million barrels over the same period and were about 17% below the five year average for late January, according to the EIA report.

By Renzo Pipoli