PBF sees US crude market souring

OREANDA-NEWS. November 02, 2015. Sour waterborne crude competition has helped pare down railed crude shipments to the US Atlantic coast and claimed more space in US crude units, US independent refiner PBF Energy said today.

An emergence of Iraqi sour crude in the US Gulf coast, increasing Gulf of Mexico production and the expected return of Iranian sour crude to the market all support much better margins for refiners capable of running heavier, high sulfur production, executives said during a conference call discussing third quarter earnings.

The conditions should favor both PBF's existing refining system and pending purchases of refineries in Louisiana and California. The company's entire system can process medium and heavy sours.

But the change will also pressure light, sweet domestic production and slash expected railed crude deliveries to the Atlantic coast. PBF Energy expects just 55,000 b/d of railed deliveries into its 210,000 b/d Delaware City, Delaware, terminal going forward, including 25,000 b/d of light sweet and roughly 30,000 b/d of heavy Canadian.

"The ability to run these heavier, higher sulfur crudes just has to be a tremendous advantage for us," executive chairman Tom O'Malley said.

Cheap US light, sweet crude rejuvenated Atlantic coast refining teetering toward the scrap yard in 2012. Slow pipeline development in the midcontinent and swift construction of railed crude offloading sites on the east coast rescued refiners there from costly imports and far more competitive US Gulf coast refining supplies.

But Bakken crude advantages on the Atlantic coast slumped in the second quarter and fully collapsed in the third. Waterborne light imports now compete with US production, and PBF, which operates the US Atlantic coast's only coking capacity, can take advantage of emerging pressure on heavier crudes.

PBF reported a third quarter profit of \\$42.8mn, down from \\$141mn in the same quarter last year but still higher than analyst expectations. An August fire on a fluid catalytic cracking (FCC) unit led PBF to undergo crude unit maintenance in September and cut third quarter production. The company's 170,000 b/d refinery in Toledo, Ohio, reported its best quarter ever, according to PBF, on steady operations and stronger crack spreads.