Why has U.S. refinery utilization fallen 5.6% this past month?
U.S. refinery utilization is 92.5, down 5.6% over the past 30 days, off a 30-day high of 98. When refiners pull back on runs, the usual reason is that their margins went thin and running the plant stopped paying. This month the margins are wide. So the drop is worth a look.
Start with the margin itself. The 3:2:1 crack spread is 64.7, up 1.66 over 30 days. The crack is the rough profit a refiner makes turning three barrels of crude into two of gasoline and one of diesel, and 64.7 is a strong number. When the crack is that wide, a plant earns good money on every barrel it runs, and the normal response is to run harder. The economics here got better and the runs still fell. The easy explanation, that refiners cut back because the margin went bad, does not hold.
Product prices say the same. Diesel is 6.382, up 14.0% over 30 days, close to its 30-day high of 6.529. Gasoline is 4.603, up 9.4%, also near its high of 4.628. High product prices sitting next to a wide crack are exactly the conditions a refiner wants to run into. Nothing in the price picture tells a plant to slow down.
The diesel retail-wholesale spread is 1.627, up 0.523 over 30 days. That spread measures the gap between what a station pays at the rack and what it charges at the pump, and a wider gap means the retailer is keeping more per gallon. Good month for the marketer who owns the street, and the driver carries the higher pump price. Neither of those pushes refinery runs lower.
If margins did not cut the runs, something else did. Two candidates stand out: crude supply and the calendar.
Take crude first. Brent is 100.11, up 5.8% over 30 days, off a high of 108.75. The wire has Brent coming down from over 103 to 97.36 after JP Morgan, Goldman and Kpler reported that oil flows out of the Persian Gulf had returned to near pre-war levels. Indian refiners are back to hiring tankers to transit the Strait of Hormuz, another sign the crude lanes are open again. So crude is more available this month, not less, and the price is easing off its high. A plant short on crude cuts runs; this is the opposite. Crude supply does not explain the cut.
Natural gas storage is 3351, up 5.2%, so the plants are not short on the gas they burn to run units either. The input side is not the constraint.
That leaves the calendar. October is fall turnaround season, when refiners schedule the maintenance they hold off during summer driving demand. A utilization reading sliding from 98 toward 92.5 over a single month, while the crack is at 64.7 and products are near their highs, fits planned maintenance better than it fits any market signal. I cannot prove that from the six numbers on my desk. It is the explanation left standing after the price-based ones fall apart, and it is the one I would put money on.
For an operator, lower runs matter because of what they mean downstream. Runs are down while the crack stays wide and products stay near their highs, which points to product supply staying tight even as crude loosens. Two items on the wire sharpen that. China's refiners have halted fuel exports until further notice, and PetroChina has canceled some gasoline and jet cargoes that were set to ship in October. That pulls barrels out of the global pool. On top of it, Trump has threatened to ban U.S. diesel exports to France and Germany unless they release 120 million barrels from reserves, and the reporting notes the ban could backfire on Texas refineries and on American drivers.
Diesel is the one to watch. It is up 14.0% against gasoline's 9.4%, it is sitting near its 30-day high, and its retail spread widened by 0.523. The China export halt and the export-ban threat both land on the middle of the barrel, which is where diesel lives. Lower domestic runs into that picture means the diesel balance could stay tight through the maintenance stretch.
What I am sure of: this is not a margin story and not a crude story. The crack is wide, crude is easing and more available, and gas storage is up, so none of the obvious market reasons for cutting runs is present. What I am not sure of is the turnaround call. It fits the timing and the numbers, but these figures do not name a single plant or a single unit coming down, so I am reading the shape, not the cause.
For a fuel operator, the useful takeaway is on diesel. With runs off, the crack at 64.7, diesel up 14.0% near its high, and China's barrels and a possible export ban both hanging over the distillate market, diesel supply could stay tight into the fall. If you can cover your diesel position now, this looks like the month to do it, and I would not count on the crude pullback showing up at the rack anytime soon.
And that was just the data. See you tomorrow.