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Refining Margins Improve As Oil Hits $45

Friday, April 29, 2016

In the latest edition of the Numbers Report, we’ll take a look at some of the most interesting figures put out this week in the energy sector. Each week we’ll dig into some data and provide a bit of explanation on what drives the numbers.

Let’s take a look.

1. Gasoline refining margins improve

 

(Click to enlarge)

- Downstream units at many integrated oil companies have been the lone bright spot for much of the down market since mid-2014, with very high margins for much of 2015. However, the margins for refineries – which buy crude and process it into gasoline, diesel, and other products – collapsed late last year.
- Only recently have refining margins improved, as evident in the Reuters chart above. There are not clear cut answers for why margins are improving, but generally speaking, they are an indication of rising gasoline demand and falling crude oil production in the U.S.
- Put simply, motorists are consuming more and more gasoline, so refiners are purchasing more crude in order to meet that demand. That is providing a demand pull on crude oil, putting a floor beneath the price of WTI. At the same time, upstream production is falling.
- Although there has been a surge in speculative interest in oil contracts, the real world changes of supply and demand are improving. And that is reflected in the spike in gasoline refining margins.

2. Natural gas prices collapse…




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