Refining profits, or margins, from turning crude oil into products such as gasoline and diesel are ballooning, and could surge further after the US, the world's top oil consumer, on Tuesday banned all Russian oil imports in retaliation of Moscow's invasion of Ukraine, reported Reuters.
The US ban on the world's biggest oil exporter of over 7 MMbpd of crude and petroleum products is expected to make it more difficult for domestic refiners to source the feedstocks needed to make diesel and other products, market participants said.
Until now, Russia's energy exports had been exempted from international sanctions by most nations. The US ban, announced by President Joseph Biden, was joined by Britain, which said it would phase out oil imports by the end of the year.
The move against Russian oil pressured the already tightly supplied market even more. Since the Feb. 24 invasion, global benchmark Brent crude futures have soared about 35% to hit USD133.15 a bbl on Tuesday, while US crude has surged 40% to USD129.44 a bbl.
European benchmark diesel's six-month spread surged to record-high backwardation of USD509.75 a ton on Tuesday, due to fears of disruptions to Russian supplies.
The US is not a big importer of Russian crude, but it imported about 350,000 bbl of unfinished oils every day in 2021, according to US Energy Department figures. Those products are used in refining to be turned into fuels for general use, of which Russia is a big supplier. They include unfinished oils such as naphtha, some types of fuel oil, and feedstock for refiners of heavy crude.
Those products are crucial for processing into other refined goods that the US exports, largely to South America and Mexico.
Margins to produce distillates in the US, such as heating oil and diesel climbed as high as USD63.26 a bbl on Tuesday, their highest since April 2020, when crude futures turned negative during the coronavirus pandemic.
US gasoline margins rose to USD36.39 a bbl on Monday, also its highest since April 2020, but since edged down to around US31 per bbl on Tuesday.
The 3-2-1 crack spread, a proxy for refining margins, surged to USD41.19 a bbl on Tuesday, the highest since at least a year ago, according to available data from Refinitiv Eikon.
As MRC informed before, Finland's Neste has replaced most of its Russian crude oil purchases with other crudes such as North Sea oil due to the crisis in Ukraine. Previously the Finnish refiner purchased from Russia some two-thirds of the crude oil it uses.
We remind that Neste has successfully concluded its first series of trial runs processing liquefied waste plastic at its Porvoo refinery in Finland. After kicking the series off with its first-ever industrial scale trial run with liquefied waste plastic in 2020, Neste has conducted additional runs in 2021. In the course of the trial runs, Neste has been able to upgrade liquefied waste plastic to drop-in solutions for plastic production and develop industrial scale capabilities to upgrade recycled feedstocks. Trials pave the way for continuous and commercial activities. Neste has set itself the goal of processing more than 1 MM tons of plastic waste per year from 2030 onwards.
Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,487,450 tonnes in 2021, up by 13% year on year. Shipments of all grades of ethylene polymers increased. At the same time, PP shipments to the Russian market totalled 1,494.280 tonnes, up by 21% year on year. Deliveries of homopolymer PP and PP block copolymers increased, whreas.shipments of PP random copolymers decreased significantly.
MRC