16 Refineries That Account For Roughly 22% Of The Country’s Total Capacity, Have Reported Upsets Or Unit Shutdowns This Week

Energy futures are selling off to start Wednesday’s session after another rally attempt came up short on Tuesday. Numerous refinery issues across the country don’t seem to be enough to convince the bulls to stick around for long, suggesting long term demand fears are outweighing short term supply concerns. 

Yesterday’s whipsaw action seems tied in large part to new of a fire at the P66 Bayway refinery in New Jersey, which is the largest facility on the East Coast.  While the fire was confirmed, the company said it only impacted non-operational equipment, suggesting production wasn’t affected, and prices quickly declined following that news.    

At least 16 refineries that account for roughly 22% of the country’s total capacity, have reported upsets or unit shutdowns this week, most due to the winter weather, although how long those facilities will need to recover remains unclear. The most serious so far appear to be the Suncor refinery outside Denver shutting down completely due to a loss of power and Total’s Pt Arthur refinery that’s indicating it will experience flaring for the next 10 days as it works to restore normal operations. We won’t know until next Wednesday’s DOE report how much actual refining output was impacted by these upsets but based on the relative lack of reaction in cash markets, it appears the damage will not come close to what we experienced in 2021. See the table below of the top 10 refinery upset events of the past 25 years.

Part of the pullback in diesel prices this week can be blamed on a sharp drop in natural gas prices – despite surging heating demand and numerous supply disruptions this week – as the forward outlook for the US and Europe suggests that the record inventory heading into the winter aren’t being threatened by recent events and a warmer outlook ahead will weigh heavily on prices. 

OPEC continues to be bullish on global oil demand, estimating healthy growth in both 2024 and 2025 in its latest monthly oil market outlook. The report does acknowledge that new oil supply from the US, Canada and Guyana will likely keep a lid on the demand for OPEC’s production the next two years, despite China and India both importing record amounts of oil.  The cartel’s output increased slightly in December as increases in Nigeria primarily and Iraq offset small declines from Iran and Saudi Arabia. The report all but shrugged off events in the Red Sea, noting that tanker rates actually ticked lower in December, despite the “uncertainties along key routes which were seen adding upward pressure to rates”. OPEC also noted the sharp drop in US refining margins in December as ample supplies in the Atlantic basin continued to apply pressure on the distillate cracks that have been the key to 2 years of great performance for many refiners.   

Click here to download a PDF of today's TACenergy Market Talk.