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US refiners gear up for work in 2017 after lull: IIR

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Planned maintenance at US oil refineries is expected to remain slightly below normal levels for the rest of 2016, before picking up in early 2017, according to industry data provider IIR Energy.

[NEW YORK] Planned maintenance at US oil refineries is expected to remain slightly below normal levels for the rest of 2016, before picking up in early 2017, according to industry data provider IIR Energy.

Scheduled refinery work, which can cut crude consumption and weigh on the oil market, has been lighter than usual since 2014, as refineries have operated at record rates to maximize profits by processing cheap crude during the 2-year-long oil price rout.

By 2017, refiners that deferred maintenance during the shale boom, when discounted domestic crude was widely available, will be due for planned maintenance.

"It is very possible that the spring 2017 turnaround season will be the largest since 2014," said David Elpers, energy analyst at IIR.

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Maintenance in the spring of 2016 was light, in line with IIR's expectations. Work in April was particularly light, with only 894,000 barrels per day of capacity offline, compared with a million bpd shut in the five-year average.

Turnarounds are not generally planned for the summer, when refiners ramp up production to take advantage of higher gasoline demand.

The fall 2016 turnaround season is expected to be below average in September and November, and those deficits will not be offset by a slightly higher-than-normal October.

In September 378,000 bpd will be shut, compared with 534,000 on average. In October the shut-ins will rise to 1 million bpd, above the average 935,000 bpd, before subsiding to just 121,000 bpd in November, 23 per cent of the five-year average, according to IIR.

November's shut-ins are concentrated at West Coast refineries, where the shutdowns may boost regional gasoline markets, but will do little for the broader oil complex, because the area is largely separate from the network of pipelines that link the rest of the United States.

This slower-than-normal season is expected to be the last period of below-average turnarounds, according to IIR and industry contractors, who expect work to rebound in 2017.

"Turnarounds will go higher, rather than lower, because people are less bullish than they were," said John Auers, executive vice president with Turner, Mason & Co, a Dallas consultancy. However, turnarounds will not soar to record levels because refiners are not spending on major capital projects that often require units to be shut, he said.

The Gulf Coast will be the focal point for most of the work, accounting for nearly all of the January shut-ins and two-thirds of shut-ins in February and March.

REUTERS

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