RE­FI­NE­RIES

L'Opinion - - The Wall Street Jour­nal - Re­bec­ca El­liott and Brad­ley Ol­son

the in­ex­pen­sive crude have rea­ped the re­wards.

BP PLC’s un­der­lying quar­ter­ly pro­fit soa­red to $3.8 bil­lion, the hi­ghest le­vel in five years, po­we­red in part by the com­pa­ny’s mas­sive re­fi­ne­ry in Whi­ting, Ind. The plant, first ope­ned by Ro­cke­fel­ler’s Stan­dard Oil in 1889, is ca­pable of run­ning about 320,000 bar­rels a day of hea­vy crude from Ca­na­da.

Hea­vy Ca­na­dian crude tra­ded for an ave­rage $28 a bar­rel be­low U.S. bench­mark prices du­ring the third quar­ter, ac­cor­ding to S&P Glo­bal Platts, while oil sold in the Per­mian was dis­coun­ted by an ave­rage $14 a bar­rel. Oil in both re­gions is ex­pec­ted to re­main re­la­ti­ve­ly cheap for at least ano­ther year, when new pi­pe­lines are set to be­gin ope­ra­ting.

Per­mian, hea­vy Ca­na­dian and other si­mi­lar crudes ac­coun­ted for about 57 % of the oil Hol­lyF­ron­tier pro­ces­sed du­ring the third quar­ter, the com­pa­ny told in­ves­tors Wed­nes­day. The Dal­las-ba­sed re­fi­ner pos­ted pro­fits of more than $340 mil­lion, its hi­ghest third-quar­ter in­come since 2012. Re­fi­ning com­pa­nies that mis­sed out on the Ca­na­dian trade sho­wed it in their re­sults. Ma­ra­thon Pe­tro­leum Corp. saw quar­ter­ly pro­fits de­cline 18 % from the same per­iod last year to $737 mil­lion, in part be­cause some of its Mid­west re­fi­ne­ries were of­fline for main­te­nance. The com­pa­ny told in­ves­tors it is now poi­sed to pro­cess about 500,000 bar­rels of Ca­na­dian crude dai­ly

It al­so ex­pects to be­ne­fit in co­ming quar­ters from gro­wing dis­counts on oil from North Da­ko­ta’s Bak­ken Shale. “We kind of see this as a per­fect storm,” said Rick Hess­ling, a se­nior vice pre­sident.

Oil in Clear­brook, Minn., one of the tra­ding hubs for Bak­ken crude, was sel­ling for near­ly $13 be­low U.S. bench­mark prices this week, ac­cor­ding to S&P Glo­bal Platts.

Do­mes­tic de­mand for die­sel and other fuel oils re­mains high, but da­ta from the Ener­gy In­for­ma­tion Ad­mi­nis­tra­tion show ga­so­line de­mand has fal­len off from a year ago as oil prices have ri­sen and re­fi­ners have ope­ra­ted at full tilt, boos­ting stock­piles.

“The real sur­prise, es­pe­cial­ly on the ga­so­line side, is just the ve­ry high re­fi­ne­ry uti­li­za­tion,” said Ga­ry Sim­mons, a se­nior vice pre­sident for Va­le­ro Ener­gy Corp. “You’ve had about a 2-to-1 in­crease in pro­duc­tion over de­mand, and it’s cau­sed a sur­plus in the in­ven­to­ry.”

The ex­port mar­ket has been a key re­lease valve. U.S. ex­ports of re­fi­ned pro­ducts top­ped 5.3 mil­lion bar­rels dai­ly in Oc­to­ber, a 33 % in­crease from two years prior, ac­cor­ding to the EIA.

Top buyers in­clude Mexi­co, Ca­na­da and Ja­pan. “If you can get your hands on dis­coun­ted crude oil, you’re in­cen­ti­vi­zed to run it and then hope you can find a home for it,” said Amy Kalt, a consul­tant for Ba­ker & O’Brien Inc., an ener­gy con­sul­tan­cy.

SIPA PRESS

A Phil­lips 66 re­fi­ne­ry in Roxa­na, Ill. The com­pa­ny’s re­fi­ne­ries ope­ra­ted at 108 % of ca­pa­ci­ty du­ring the third quar­ter as oil drillers in Ca­na­da and West Texas found dif­fi­cul­ty mo­ving their pro­duct.

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