A number of permutations are coming in on the back of the EU ban on seaborne imports of Russian oil and a rebound in Chinese demand.
The EU will ban—effective February 5—seaborne imports of Russian refined oil products and around 1 million barrels per day (bpd) of Russian diesel, naphtha, and analysts say other fuels need to find a home elsewhere if Moscow wants to continue getting money for those products.
“Uncertainties remain around the pace and impact of China’s recovery, the magnitude of a potential US or global recession, and the impact of Russian product sanctions. But despite these unknowns, we believe that the current supply constraints and growing demand will support strong refining margins in ’23,” Marathon Petroleum’s CEO Mike Hennigan said on Tuesday.
“Given the dynamic nature of the situation in Russia, that supply assurance component is really a big unknown, but we feel well — very well positioned to take advantage of that, given our position in the Atlantic basin,” said Brian Partee, senior vice president, Global Clean Products Value Chain.
ExxonMobil’s CEO Darren Woods said that “If demand picks up, economies continue to grow, we’re going to see that tightness manifest itself in continued high refining margins, which I think will mean fairly high margins this year and potentially going into 2024 as well.”
The EU sanctions on Russian fuel imports are bullish for U.S. refining margins, although the timeline for the bullishness will likely be beyond the second quarter, due to Europe stocking up on diesel ahead of the ban, said Marathon Petroleum’s Partee.
“We’re entering the sanction period of time at really historically high levels of inventory, particularly in Europe. So, we view it as 2Q and beyond timeline perspective. But, directionally, we see it as bullish for cracks.”
By Ken Okoye