Prudential Financial sees no change in US refining margins

Sept. 18, 2001
Prudential Financial has not changed its prediction of a $7.15/bbl margin for US refiners for the remainder of the year, despite uncertainty following terrorist attacks. It said refining margins have more than doubled in the last 6 weeks after declining about 60% in the 6-week period prior to that.

By the OGJ Online Staff

HOUSTON, Sept. 18 -- Prudential Financial has not changed its prediction of a $7.15/bbl margin for US refiners for the remainder of the year, despite uncertainty around terrorist attacks.

Andrew Rosenfeld, an analyst for the Prudential Securities Inc. subsidiary, said, "We believe that the demand for jet fuel will decline for the remainder of the year, but should be offset by an increase in demand for distillate fuels and gasoline as consumers switch modes of transportation due to recent events.

"The loss in jet fuel demand should not affect refining operations, as the refining industry is able to adjust operations to swing jet fuel production into distillate, residual fuel oil, and gasoline production."

Rosenfeld said since peaking in mid-July, US crude and product inventories have plunged 36 million bbl (crude down 11 million barrels, gasoline down 23 million barrels, and all other products down 2 million bbl) and are now back in the lower third of their 5-year average.

"We expect broadly flat US inventories over the balance of 2001 and an upward trend in US refining margins from their end of June levels of $3.85/bbl.

"Refining margins have more than doubled in the last 6 weeks after declining about 60% in the 6-week period prior to that. Spot US refining margins closed Sept. 14 at $8.43/bbl."

Rosenfeld said, "We believe refining margins should remain above normal for about 12 months, as recent operating rate reductions should cause a decline in heating oil production at a time when refiners typically maximize it to build stocks for the winter season. The continued possibility of unscheduled downtime and supply disruptions could also cause refining margins to spike, as is currently occurring in the Midcontinent."