Valero: Diet turns sour in 2015

OREANDA-NEWS. US independent refiner Valero expects to shift back into medium and heavy crudes as an oversupply of Opec barrels pressures sour prices.

The crude market will remain oversupplied "for the foreseeable future" but an outlook for refined products remained hazy, the company said today.

Forward crude purchases would delay some of the change in crude diet, but beginning in March the refiner's US Gulf coast refineries would begin to process more medium sour and heavy sour crudes, said Gary Simmons, senior vice president of supply, optimization and operations.

Runs of sour crudes fell in the fourth quarter by 158,000 b/d compared to the same quarter of 2013, while the company increased light, sweet throughputs by 165,000 b/d, or by 15pc, to 1.239mn b/d.

"I think the fact that the Saudis have signaled that they are going to continue to put medium sour barrels on the market will mean that our sour differentials should remain supported," Simmons said. "The combination of that, with the additional Canadian heavy into the US Gulf coast, we believe, will give us a good heavy sour differential as well."

Plunging retail prices in the US had perked up demand in recent weeks and turned supplies inland instead of toward export. But gasoline exports have begun to pick up to Latin America and Canada, Simmons said. A mild winter cooled European distillate demand, though exports continued during the quarter to Latin America.

"There's not a lot of incentives to do distillate exports in the current market," Simmons said.

Refinery maintenance will reduce throughputs in the first quarter, particularly in the US Gulf coast, where the company expects to run 1.45mn b/d to 1.55mn b/d. In the US midcontinent Valero will run between 430,000 b/d and 450,000 b/d, between 240,000 b/d and 260,000 b/d in the US west coast and between 450,000 b/d to 470,000 b/d in its Canadian and United Kingdom facilities.

The refiner increased runs by 40,000 b/d in the fourth quarter compared to the same quarter of 2013, to 2.8mn b/d.

A 3.4 increase in US Gulf coast and 8.4pc in midcontinent throughputs offset an 11.3pc drop in Canadian and United Kingdom runs. US west coast throughputs were effectively flat, higher by 1.1pc. The Canadian and United Kingdom refineries reported the strongest margins of the quarter, at \$9.86/bl, more than three times the same quarter of 2013. The company's US midcontinent and west coast refineries also increased per barrel margins over the same period, but US Gulf coast margins fell by 4.3pc.

Valero reported a profit of \$952mn, down slight from \$963mn in the same quarter of 2013.