Gasoline Refinery Profits Could Fall to Zero
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Refineries profits could be in a rough patch as the profit from producing gasoline, or crack, may fall to zero later this year amid ample refining capacity and declining consumption in North America and Europe, says Bank of America/ML.
"The refining complex will need to see the shutdown of at least another 2 million barrels a day of refining capacity before refinery utilization rates nudge back up toward the attractive levels seen between 2004 to 2008," Francisco Blanch, head of commodities research in New York, said in a note dated yesterday.
Refining facilities in the U.S. East Coast have closed amid falling returns, including Sunoco Inc.’s 194,000 barrel-a-day Marcus Hook plant in Pennsylvania, and six European plants have shut since the start of last year as the region’s debt crisis.
"Market consolidation will have to continue amid falling demand, the return of some previously closed capacity and the arrival of new, sophisticated refineries," the bank said.
Energy Select Sector SPDR ETF (NYSE: XLE) is lower by nearly 14 percent in the past 3 months, as companies in the industry continue to struggle.
Some specific refiners to watch on the comments include: Valero Energy Corporation (NYSE: VLO), Tesoro Corporation (NYSE: TSO), Western Refining, Inc. (NYSE: WNR).
"The refining complex will need to see the shutdown of at least another 2 million barrels a day of refining capacity before refinery utilization rates nudge back up toward the attractive levels seen between 2004 to 2008," Francisco Blanch, head of commodities research in New York, said in a note dated yesterday.
Refining facilities in the U.S. East Coast have closed amid falling returns, including Sunoco Inc.’s 194,000 barrel-a-day Marcus Hook plant in Pennsylvania, and six European plants have shut since the start of last year as the region’s debt crisis.
"Market consolidation will have to continue amid falling demand, the return of some previously closed capacity and the arrival of new, sophisticated refineries," the bank said.
Energy Select Sector SPDR ETF (NYSE: XLE) is lower by nearly 14 percent in the past 3 months, as companies in the industry continue to struggle.
Some specific refiners to watch on the comments include: Valero Energy Corporation (NYSE: VLO), Tesoro Corporation (NYSE: TSO), Western Refining, Inc. (NYSE: WNR).
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