Publications: Notes at the Margin

Refining Economics (February 5, 2018)


This Notes at the Margin focuses on refining economics. In our discussion of refining, we note that the current decline in crude inventories and resulting backwardation in crude prices provide financially solvent and technically up-to-date refining companies with a chance to boost future margins by buying forward crude. The data seem to indicate that such forward buying is beginning.


We also note that the PES bankruptcy may force changes in the renewable fuels program. While refining companies and oil producers would like it repealed altogether, this will not happen. However, the bankruptcy courts could create great turmoil for it.


Following our discussion of refining economics, we turn to the outlook for oil prices. Thursday morning Goldman Sachs raised its forecast by a whopping $15 per barrel. Prices rose sharply that day and then dropped on Friday.


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