US Gulf coast petroleum coke prices could gain further support in the near term from narrowing heavy-light crude spreads and lower run rates at some US refineries, particularly because of higher demand for January-arrival coke.
December-loading spot coke supply has been declining since early October, when sellers began to take advantage of higher bids for cargoes that would arrive in the new year compared with those arriving in November or December. Dwindling December-loading supply lent support to fob US Gulf coast 6.5pc sulphur coke prices, lifting them to $60/t fob on 27 November from $50/t on 2 October. Demand for December loadings continues to buoy prices for the high-sulphur specification, with a US Gulf coast refinery this week selling the material via tender in the low-to-mid $60s/t fob for loading in late December. Some coke producers were planning to participate in this tender.
One refiner is considering delaying a December laycan to January because its output is falling behind expectations, saying that some refineries are running at reduced rates because crack spreads are not particularly strong. US retail gasoline prices fell to three-year lows this week, while crude prices have been relatively high. The Mars 3-2-1 crack spread on the US Gulf was $1.63/bl below a year earlier on 26 November.
Despite this, refinery runs nationwide rose to a 13-week high of 17.1mn b/d last week from 16.6mn b/d the prior seven-day period. This level of downstream throughputs has not been seen at this time of year since 2018, according to Energy Information Administration data.
A weaker yield for heavy products could explain why market participants are reporting tight supply despite refinery runs overall being seasonally strong. Heavier crudes are losing some of their price competitiveness compared with lighter, sweeter crudes, which crimps profits for products at the lower end of the barrel. The price discount for heavy Western Canadian Select crude to the Nymex calendar month light sweet crude index reached a midpoint of $3.525/bl — the lowest level so far this year — on 21 November.
The Argus US Gulf coker yield — a measure of total value of products from a coker — has fallen to only $385/short ton as of the latest assessment in late November, down from $439/st in late June. And it is now even with the fob US Gulf asphalt price at $385/st, meaning there could be an incentive for refiners to sell asphalt rather than run bottoms through their coker units. The asphalt price was $5/st above the coker yield on 15 November.
Further adding to the potential for thinner supply, some refiners, including PBF and Marathon, said they would reduce fourth-quarter refinery run rates from the same period last year and from July-September levels. Coker work at BP's 435,000 b/d Whiting, Indiana, refinery also stretched from late August to November, reducing supply.
Some US refiners anticipate that planned refinery closures could boost margins, perhaps as early as next year. But refiner LyondellBasell, which is closing its 264,000 b/d Houston, Texas, refinery starting in January, said on 1 November it expects a "sharp decline in gasoline crack spreads" in the fourth quarter, which may continue to weigh on coke output.
Some of the near-term tightness could be related to sellers' strategies, as traders still have December-loading coke to offer and have been holding back volumes in hopes of getting higher prices.