Lower crude prices and higher demand for gasoline driving higher margins
Gasoline crack spreads in the United States, especially on the U.S. East Coast, have reached several-year highs in recent months. A recent note from the Energy Information Administration (EIA), looked at crack spreads in order to get an idea of refiner profitability.
In April 2015, wholesale conventional gasoline in New York Harbor averaged $1.79 per gallon, and the Brent crude oil spot price averaged $1.41/gal ($59.39 per barrel, divided by 42 gallons per barrel). The difference in prices results in a crack spread of $0.38/gal, the highest crack spread for the month of April since 2007.
The refining industry in other parts of the world is also seeing increased refining margins. In the European gasoline market, the Northwest Europe gasoline market, the Northwest Europe gasoline-Brent crack spread averaged $0.35/gal in April, the highest since at least April 2010. In Asia, the Singapore gasoline-Dubai/Oman crack spread averaged $0.39/gal in April, similar to levels last year and $0.03/gal below the recent high in April 2012.
According to the EIA, the driving factors behind the increased global refining margins are low crude oil prices, robust U.S. gasoline consumption and exports, and higher-than-expected demand for liquid fuels in Europe and some countries outside the Organization for Economic Cooperation and Development (OECD).
Refiners in many regions of the world have been processing larger volumes of crude oil to take advantage of these higher gasoline crack spreads. On the U.S. East Coast, average gross inputs to refineries in April were the most for that month of the year since 2010.
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