In the mid of coronavirus pandemic, demand for fuels has been crashed which might push some US refineries to a shutdown after lowering the operating rate after their storage facilities are filled up with fuels unsold.
Marathon Petroleum Corp., Valero Energy Corp., and Phillips 66 are among the companies at risk to close their refineries as most are under an operating rate of around 60-65% of their nameplate capacity.
As demand for gasoline plunged by almost half and storage tanks filling up, refineries have decreased the processing rate by 3.5 million bpd from the year-end. However, the reduction would not be sufficient to limit the increasing glut in the market.
Analyst Andy Lipow of Lipow Oil Associates LLC said that shutting down a refinery is a complex matter that heavily relies on the amount of crude being processed. He opined that the minimum crude unit rates can range from 60% and up, depending on several factors.
The type of oil being used, whether there are multiple units, and the space of storage available will highly affect the rates.
Analyst Stephen Wolfe of Energy Aspects Ltd. said that his personal standard for an operating rate for a crude distillation unit (CDU) is 65%. Below that level, all the downstream operations might be negatively affected as there are hydraulic limitations.
In this case, smaller plants have less flexibility than bigger ones as if the entire facility has to be halted, units may be put on circulation with no fuel being made or shut down completely.
Moreover, an inland refinery cannot just transport the intermediate products away as they need to use the more-expensive rail or store the products.
