Thread by @Big_Orrin

1. Thread
For those stuck in the office and not stuffing their face with Turkey and arguing with their family over politics.

The biggest disappointment in the US has been refinery throughput this year in general. The question of what has caused it is an open question

#OOTT

2. In the latest EIA weekly, crude throughput was 1.2mbpd less than last year while gross throughput was over 0.9mbpd less than last year. That indicates that US refiners are using more other feedstocks than last year, mainly straight run fuel oil.

3. But utilization has been poor in 2019 compared to 2018 Suggests a number of possibilities
- Unintended shutdowns due to fires etc.
- The crude slate has lightened too much
-Potentially bigger autumn maintenance season than normal to take advantage of IMO

4. The 2nd point can be seen in Distillate yields which have remained within the 30-31% range despite HO trading at a premium to RBOB for virtually the whole year. Suggests that refineries cannot increase yields and is usually a consequence of running high levels of light crude

5. API of crude entering the refineries have increased this year meaning a lighter slate.
PADD1: 32.83 vs. 32.18
PADD2: 35.59 vs 34.83
PADD3: 33.35 vs 32.62
PADD4: 33.15 vs 32.67
PADD5: 28.62 vs 28.19

5a. This would be the consequence of refineries making their margin from the low local crude prices rather than the optimization of the product slate.

But this method may see refinery utilization low for the foreseeable future as refiners continue to lighten their crude slate

6. But looking deeper into the numbers. distillation capacity over the last year has fallen 129kbpd when taking into account the loss of PES

PADD1: - 335kbpd
PADD2: +55kbpd
PADD3: +111kbpd
PADD4: +4kbpd
PADD5: +37kbpd

7. However Crude throughput has fallen 1.219mbpd. When taking into account above changes above it is 1.090mbpd. Therefore, comparing for similar utilization to 2018

PADD1: +30kbpd (if PES running at 86% in 2018)
PADD2: -214kbpd
PADD3: -765kbpd
PADD4: +9kbpd
PADD5: -201kbpd

8. When looking at as utilization with Gross throughput rather than just Crude throughput

PADD1: +72kbpd (if PES running at 86% in 2018)
PADD2: -185kbpd
PADD3: -618kbpd
PADD4: +10kbpd
PADD5: -192kbpd

9.
When removing PES

Overall Utilization is 90.9% vs. 95.6% in 2018

PADD1: 94.5% vs 86% in 2018
PADD2: 91.3% vs 95.7% in 2018
PADD3: 91.1% vs 97.3% in 2018
PADD4: 87.5% vs 86% in 2018
PADD5: 89.6% vs 96.2% in 2018

10. Overall if this drop in utilization is purely down to maintenance then it could be bullish for oil demand in Q1/Q2 in 2020 as spring maintenance will be less than usual as refineries have brought forward their shutdown to take advantage of IMO.

11. But if this is a lightening of crude slate then utilization going forward may be lower than expected reducing oil demand until refiners can work out how to increase extra light product processing.

12. Happy Thanksgiving.