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Market Assessment of Refinery Outages Planned for March 2010 through June 2010
Market Assessment of Refinery Outages Planned for March 2010 through June 2010 reviews the supply implications of refinery outages planned for March through June 2010, which covers the seasonal increase in gasoline demand. Refinery outages are the result of both planned maintenance and unplanned unit shutdowns. Maintenance is usually scheduled during the times when demand is lowest, i.e., in the first quarter and again in the fall. Unplanned outages can occur at any time and for any reasons such as mechanical failure, fire, or flood.

The Energy Information Administration's (EIA) analysis of current data for planned refinery outages, combined with the typical level of unplanned outages, indicate that available refinery capacity during March through June 2010 is adequate to meet projections of gasoline and distillate demand based on EIA's February 2010 Short-Term Energy Outlook (STEO).

Adequate capacity is being projected in spite of some large planned outages and several large refinery closures, including Sunoco's 150,000-barrel-per-day Eagle Point Refinery in New Jersey and Valero's 182,000-barrel-per-day refinery in Delaware City, Delaware. At roughly the same time as the East Coast closures, Marathon started operation at its 180,000-barrel-per-day refinery expansion in Garyville, Louisiana. Since refineries on the Gulf Coast help to meet East Coast demand, the addition of the Marathon capacity cushions some of the East Coast loss.

In the face of large outages and refinery shutdowns, EIA projections for surplus available capacity result from reduction in petroleum demand, stemming mainly from the recession and from increased use of ethanol in gasoline. In addition, high gasoline inventories in most regions provide some additional supply cushion, and additional gasoline imports should be readily available should the need arise.

Distillate demand (diesel and heating oil) during the recession has fallen more than gasoline demand since distillate use is mostly diesel fuel consumed in heavy-duty trucks, which move goods throughout the country, and thus is strongly affected by the economic downturn. Similarly, since a slow economic recovery is expected, distillate demand is not projected to recover quickly.

EIA relies on commercial data, mainly that of Industrial Info Resources, Inc. (IIR), to identify planned and unplanned outages. The production loss from these outages must be estimated to assess the potential impacts on markets. EIA estimates refinery production impacts of the outages using EIA historical refinery production and unit input data. This report focuses on crude distillation and fluid catalytic cracking (FCC) unit capacities, since these are the refining units that have the most impact on production of distillate and gasoline, respectively.

As shown in Table S-1, available refinery crude distillation capacity could run about 1.5 to 2.0 million barrels per day (10 to 13 percent) more than is projected to be needed to meet petroleum demand in March through June. Likewise, as shown in Table S-2, available catalytic cracking unit capacity could run 7 to 10 percent more than is expected to be needed to meet petroleum demand during this period.

Regionally, the Midwest exhibits the tightest potential balance mainly due to planned FCC outages. But Midwest outages can be backed up by Gulf Coast refineries, which are projected to have ample surplus capacity. West Coast FCC outages also produce a tighter balance than the overall U.S. balance might imply, but available supply still appears adequate to meet demand projections.

In summary, U.S refineries should be able to meet March-through-June fuel demand with available refinery process units for distillate and gasoline production net of outages. This, in conjunction with relatively high inventories and extra import potential, indicates small potential for significant price impacts due to planned outages.

Table S-1. U.S. Comparison of Maximum Crude Inputs from Crude Distillation Capacity Available After Outages with STEO-Projected Crude Input Needs (Thousand Barrels Per Stream Day)
Month Actual and Projected STEO Crude Inputs Distillation Capacity Estimated Total Distillation Outages Distillation Capacity Net of Outages Potential Crude Inputs (Net Capacity * 0.907) Potential Crude Inputs minus STEO Inputs
January 2010 Actual 13,752 18,464 991 17,473 15,848 2,096
February 13,717 18,464 1,099 17,365 15,750 2,033
March 13,920 18,464 1,047 17,417 15,797 1,877
April 14,227 18,464 742 17,722 16,074 1,847
May 14,585 18,464 438 18,026 16,349 1,764
June 2010 14,950 18,464 269 18,195 16,503 1,553
Note: Distillation capacity reflects the January 2009 idling of the West Coast Flying J-Bakersfield refinery; December 2009 closure of the East Coast Eagle Point and Delaware City Refineries; and Gulf Coast Marathon's Garyville capacity addition. January and February crude inputs are based on weekly data through February 24. March through June 2010 data are Energy-Information-Administration-projected crude inputs. The potential crude inputs are estimated by applying a factor (0.907) that represents the average of the 10 highest utilization months from January 2002 through December 2009, where utilization was estimated as crude inputs over distillation capacity net of outages.
Sources: February 2010 Short-Term Energy Outlook (STEO), Industrial Info Resource (IIR), www.iirenergy.com, February 18, 2010 database.


Table S-2. U.S. Comparison of Maximum FCC Inputs from FCC Capacity Available After Outages with Estimated STEO-Projected FCC Input Needs (Thousand Barrels Per Stream Day)
Month Actual and STEO-Projected Crude Inputs Actual and Projected FCC Inputs (FCC Pct Crude = .356) FCC Capacity Estimated Total Outages Capacity Net of Outages Potential FCC Inputs (Net Capacity * 0.942) Potential Inputs minus STEO Inputs
January 2010 Actual 13,752 4,758 6,147 592 5,555 5,233 475
February 13,717 4,746 6,147 650 5,497 5,178 432
March 13,920 4,816 6,147 576 5,571 5,248 432
April 14,227 4,923 6,147 465 5,682 5,352 430
May 14,585 5,046 6,147 261 5,886 5,545 498
June 2010 14,950 5,173 6,147 250 5,897 5,555 382
Note: Fluid catalytic cracking (FCC) capacity reflects the December 2009 closure of the East Coast Eagle Point and Delaware City Refineries. The FCC input volumes are estimated by multiplying crude inputs by a factor (0.346) that represents the average observed ratio between FCC and crude inputs for facilities experiencing no major outages. The potential FCC inputs are estimated by applying a factor (0.942) that represents the average observed difference between FCC input volumes and capacity in the United States for facilities experiencing no major outages and running at high input levels.
Sources: February 2010 Short-Term Energy Outlook (STEO), Industrial Info Resource (IIR),www.iirenergy.com, February 18, 2010 database.