MOSCOW (MRC) -- Valero Energy Corp. expects lower refinery utilization over the rest of the year as companies step up efforts to counter slumping refining margins caused by record supplies of gasoline and diesel products, said Hydrocarbonprocessing.
Analysts have said the market will be unable to soak up the gasoline that refiners stockpiled ahead of a summer driving season unless demand surges. The glut in refined products pushed down Valero's refining throughput margin to USD8.93/bbl in the second quarter ended June 30 from USD13.71/bbl, a year earlier.
"Refinery utilization has been such that supply has been able to keep up and even outpace demand, so ultimately we are going to need a rebalancing and see lower refinery utilization," said Gary Simmons, senior vice president of supply, international operations and systems optimization at Valero.
The company expects combined throughput to fall marginally to 2.79 MMbpd at its 15 refineries in the third quarter, from 2.83 MMbpd in the second quarter. Valero said it expects 94% capacity utilization at its refineries in the third quarter, unchanged from the second quarter.
Refiners are also being pressured by a rise in global oil prices, which hit six-month highs in June, and higher costs for the renewable fuel credits.
BP's refining margins hit a six-year low in the latest quarter and the company said margins would remain under significant pressure in the coming months. Valero said biofuel blending costs more than tripled to USD173 M in the latest quarter, primarily due to the purchase of the credits known as Renewable Identification Numbers (RIN).
The company said it continues to expect the cost to be in the range of USD750 M to USD850 M this year. Valero's credit costs were USD440 M in 2015, according to filings reviewed by Reuters.
Operating income from Valero's ethanol business fell about 36% to USD69 M in the second quarter.
As MRC informed earlier, Valero Energy Corp.’s previously-announced USD700 million methanol plant, planned at its existing St. Charles Parish, LA, facility, has been shelved indefinitel.
Valero Energy Corporation is a Fortune 500 international manufacturer and a marketer of transportation fuels, other petrochemical products, and power. It is based in San Antonio, Texas, United States. The company owns and operates 16 refineries throughout the United States, Canada, United Kingdom, and the Caribbean with a combined throughput capacity of approximately 3 million barrels (480,000 m3) per day, 10 ethanol plants with a combined production capacity of 1.2 billion US gallons (4,500,000 m3) per year, and a 50 megawatt wind farm.
MRC