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FINWIRES

Oil Refiners Poised for Strong Q3 as Product Cracks Surge Despite Crude Selloff, TPH Says

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Refining margins strengthened even as crude oil prices fell sharply after the US and Iran paused military strikes and renewed diplomatic engagement, underscoring continued tightness in global fuel markets, according to TPH Energy Research in a Monday note.

TPH Energy analysts said Brent crude dropped about $7 to about $89 per barrel after the US and Iran halted hostilities, while Iranian and Omani officials held talks on the Strait of Hormuz and oil tankers resumed loading at a Kazakh export terminal.

However, Matthew Blair, analyst at TPH, said prices for refined products proved far more resilient than crude, pushing refining margins, or cracks, higher across most major trading hubs.

The US gasoline crack against Brent widened by about $2 to $48 per barrel, while northwest European gasoline margins rose $3 to $34/bbl. Singapore gasoline cracks also edged higher, rising $1 to $25/bbl, according to TPH.

Diesel margins posted even stronger gains. The US diesel crack climbed $5 to $84/bbl, while northwest European diesel margins jumped $7 to $70/bbl. Singapore diesel cracks eased $6 to $60/bbl after surging about $11/bbl last week.

The divergence between falling crude prices and resilient refined product prices points to continued strength in fuel demand and constrained product markets, despite signs of easing geopolitical risks.

Blair said recent disruptions to global energy trade have provided a strong start to Q3 for refiners. US gasoline cracks are running about $13/bbl above Q2 levels, while US diesel margins have increased about $14/bbl over the quarter from already robust levels.

Regionally, the largest improvements over the quarter have been recorded on the US West Coast, East Coast and Gulf Coast, while gains over the year have been strongest on the Southwest, West Coast and Gulf Coast.

TPH said the stronger refining economics are projected to lift earnings expectations for refining companies in Q3 if current market conditions persist.

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