[pup55]

$this->bbcode_second_pass_quote('', 'T')here's plenty of cheap oil left--if you own the right refinery. Jim Gibbs is enjoying it while it lasts.

When oil hit $100 a barrel in January Frontier Oil Corp. (nyse: FTO - news - people ) was paying half that for much of the crude needed to feed its Wyoming and Kansas refineries. The oil, from producers in western Canada, is gooey, acidic and high in sulfur--harder to refine than benchmark West Texas Intermediate (light, sweet) crude. Frontier's refineries are built tough, with stainless steel catalytic crackers and cokers that cook the crud into gasoline, diesel, jet fuel and $30 a barrel in profit.

[pup55]

$this->bbcode_second_pass_quote('', 'C')rude Oil 98.91
HO 2.7625
RBOB 2.5195

Ref Margin 12.7264 $/bbl
Ref Margin 0.3030 Cents/Gal

[pup55]

Guess I should have waited until afternoon to update this:

$this->bbcode_second_pass_quote('', 'C')rude Oil 100.79
HO 2.8064
RBOB 2.5455

Ref Margin 12.3669 $/bbl
Ref Margin 0.2945 Cents/Gal

[pup55]

$this->bbcode_second_pass_quote('', 'C')rude Oil 102.49
HO 2.82
RBOB 2.67

Margin 12.359 $/bbl
Margin 0.294261905 Cents/gal

[pup55]

$this->bbcode_second_pass_quote('', 'C')rude Oil 103.66
HO 2.8600
RBOB 2.728

Ref Margin 14.0761 $/bbl
Ref Margin 0.3351 Cents/Gal

[pup55]

$this->bbcode_second_pass_quote('', 'C')rude Oil 103.15
HO 2.9104
RBOB 2.5827

Ref Margin 13.1685 $/bbl
Ref Margin 0.3135 Cents/Gal

[pup55]

Crude Oil 105.38
HO 2.9435
RBOB 2.6394

Ref Margin 12.7550 $/bbl
Ref Margin 0.3037 Cents/Gal

The refiners were beaten up yesterday, but today is another day. Still not enough money being made by this group.

[AirlinePilot]

Pup, you got any graphs you can find for these numbers, say over the last year to five years??

Just curious, you obviously have better sources than i do. I'm lazy too.

I'm looking for a jet fuel graph also.

[pup55]

Nymex Prices

The raw data for Ho and RBOB is in this spreadsheet.



RBOB only goes back to 2005






HO



The Jet Fuel data is in the "spot price" spreadsheet.

[pup55]

Crude Oil 108.77
HO 2.9915
RBOB 2.72

Ref Margin 11.9697 $/bbl
Ref Margin 0.2850 Cents/Gal

Prices of the products have not (yet) caught up to the crude price. When unleaded demand starts to pick up in another three weeks or so, this will change.

[Mechler]

Well, a horrible week for the refiners, especially for my baby, WNR.

Western Refining Debt Rating Under Review

$this->bbcode_second_pass_quote('', 'T')he negative CreditWatch listing reflects our concerns over the rapid deterioration in refining margins, and a prolonged period of weak markets and its impact on the company's financial measures,

[pup55]

Agreed, tough times.

I think it all comes down to the unleaded. As we know from the post we did awhile back, on average, the unleaded price should be roughly equal to or higher than the heating oil price by this time. Instead, it is about 50 cents lower, which is unprecedented.

We also know from the sleuthing work we did the other day that in five out of the last six years, the unleaded price has increased by an average of about 16% in the eight week period right before the expiry of the May contracts, which is the last week in April. So, in a month, roughly, this situation could be completely different.

Unleaded products supplied are still about .4-.5% higher this year than last, despite the so-called economic downturn. The annual bailout that comes from imported fuel from Europe has an excellent chance to not show up this year (they are importing heating oil and diesel). There is still the wild card on the refinery downtime, which we know right now is pretty substantial, and besides, the refining business is one of the few which is capable of creating its own shortage, by just prolonging their "planned" maintenance.

As to the debt rating/stock performance, what is the worst case? You know that their refining capacity is 223,000 bpd, and to get new refining capacity costs about $20,000 per BOD capacity. The value of the company in just its refining capacity alone is $4.6B or almost 68 per share, if my spreadsheet is right, so if things get too bad, they will be a no brainer takeover target, if they are not already.

[Mechler]

Imports have already been saving us, right? 85% utilization last week, according to the petroleum summary. Wouldn't it be a kick in the pants if the refiners extend their planned maintenance at the same time that imports drop off and seasonal demand increases!

Anyway, things seem out of whack and it should be an interesting spring /summer watching how it plays out.

[pup55]

$this->bbcode_second_pass_quote('', 'C')rude Oil 110.52
HO 3.1555
RBOB 2.7026

Ref Margin 13.8316 $/bbl
Ref Margin 0.3293 Cents/Gal

[pup55]

$this->bbcode_second_pass_quote('', '
')The current situation will not last much longer

[pup55]

$this->bbcode_second_pass_quote('', 'C')rude Oil 108.14
HO 3.1120
RBOB 2.612

Ref Margin 13.5340 $/bbl
Ref Margin 0.3222 Cents/Gal

[pup55]

$this->bbcode_second_pass_quote('', 'C')rude Oil 99.44
HO 2.9572
RBOB 2.5111

Ref Margin 16.7058 $/bbl
Ref Margin 0.3978 Cents/Gal

[Mechler]

Pup,

I don't know if you've touched on this already, but, do refiners buy crude at spot prices, or do they lock up contracts far in advance?

If they're working with contracts, that makes their true refining margins a little harder to calculate, right?

Thanks!

[pup55]

These crude oil buyers hate to run out of oil, but they also hate to pay too much. If they think the price will go down, they will trade the spot market or nearby contracts if that is cheaper. They may anticipate a shortage farther out, and bid up the price of the farther out futures, which is what happened in 2005 and 2006 when the market went into contango.

Some of them will lock in maybe 80% of their requirements at a known price, so as to avoid any shortage issues, then play the system a little bit to try to miminize their cost on the marginal barrel or tanker.

What causes them a lot of problems is that the marketing department has to tell them what the forecast is, so that they know how the plant scheduling is going to be, and that in turn relates to the finished goods prices. If everybody gets the idea that finished products prices are going down the tubes, they may stay down for a couple of extra weeks for maintenance. So, the buyer may be stuck with extra crude that they will have to store somewhere. That's why you get days like this, when everybody is trying to lighten up on their purchases, and also, why you get days like we are going to have later on, when everybody realizes they need crude oil and goes into the market at once.


Also, keep in mind that the prices on this little calculation are "calibrated" for about what Tesoro sees as a refining margin. The people that can use heavier crude (like FTO) can get their feedstock cheaper, and sell out west where the prices are higher, so they have a slightly different margin. Their buying decisions will be slightly different.

So, at times like these, these guys have a hard job. The pricing is really erratic, the information coming in from their sales department is variable, and they have to anticipate future production needs and balance that with inventory and the expected price in a few weeks when they can get their delivery.

However, most of these guys I ever knew were kind of obnoxious for some reason, so I do not feel too sorry for them.

[pup55]

$this->bbcode_second_pass_quote('', 'C')rude Oil 105.81
HO 3.0300
RBOB 2.73

Ref Margin 16.0320 $/bbl
Ref Margin 0.3817 Cents/Gal