Northwest European refining margins are slightly stronger this week than last, reacting to firmer cracks in the light-end and middle distillate markets, market sources said Wednesday.
Northwest European refining margins were not described in breakout territory, although four North Sea crude traders said they were positive, with one source at a refiner pegging complex Northwest European margins for Forties crude at about $1/barrel.
Most North Sea crude traders said strengthening light end cracks were the main supportive factor behind the higher margins, although middle distillate strength was also supportive.
"Refining margins are not bad lately. [The Mediterranean margins] are not as good as in Northwest Europe, but we are getting quite short of gasoline now so the value should improve," a source at one refiner said.
The front-month gasoline crack firmed to plus $11.20/b Tuesday, up from plus $10.75/b Tuesday April 26, according to Platts data.
At the start of April, the front-month crack was plus $8.50/b.
Middle distillate cracks have also firmed on last week, with rises of between about $0.50 to $1/barrel for jet, diesel and 0.1% sulfur gasoil. Jet fuel has been the most supportive of the middle distillate cracks recently, assessed at $17.48/b Tuesday, up $1/b on the week, Platts data shows.
3.5% sulfur fuel oil has also strengthened slightly, up about $1.50/b since last Tuesday to be assessed at minus $21.68/b Tuesday, Platts data shows.
However, a strong prompt crude market is a bearish factor for refining margins, hindering any significant surge, a North Sea crude trader said.
"High crude differentials and the [backwardated] Dated Brent structure is killing the margin," a source at a refiner said.
Some North Sea crude traders have said that further run cuts may be on the horizon, down from the current 80% for some sites, which were down 5 percentage points last month, traders said.
"Margins are indeed not really good, but mainly because simple refinery CDU margins are pretty bad, other units are [better], making only a slightly positive margin for complex refineries," one distillates trader said.
