US refiners at full throttle as margins under threat

Bloomberg

US refiners have returned from maintenance with a vengeance, processing more than 18 million barrels a day of crude and other oils for the first time in the week ended June 22. What does that mean for the markets?
Gasoline stockpiles have increased 2.9 percent in June, the biggest gain for the month since 2009. There’s enough supply to cover 25.4 days of demand, almost a full day above the five-year average.

SHRINKING MARGINS
The record runs are squeezing the once-mighty profit margins for refiners.
The Nymex gasoline crack spread, a rough measure for how much refiners make from producing the motor fuel, sank more than 30 percent in June, the biggest drop for the month in a decade, helped by a tightening WTI-Brent spread.
With gasoline the weakest relative to diesel seasonally in five years, refiners are pushing out motor fuel into a swamped market. Typically, production maxes out in the summer to meet driving demand, and refiners are “tuned” to produce more of the motor fuel. A glut of gasoline will weigh on margins, given it’s almost twice the yield of distillate.
“These prices that we are seeing at the pump are going to dissuade growth on the consumer side. On the diesel side, prices are still a little lower than they had been–there was still some room to run,” said Ashley Petersen, lead oil analyst at Stratas Advisors in New York. “It’s a little easier for shipping companies to distribute those costs than it is for John Smith who is paying $3.50 at the pump to distribute that in his monthly budget.”
The refining bonanza typically leads to declines in US crude stockpiles as refiners increase demand for oil to process. Crude inventories are sliding, after lagging previous years’ declines for the beginning of peak driving season.
Record crude production from the Permian Basin can’t keep up with all-time high demand from refiners and exporters. Stockpiles posted the biggest June drop on a percentage basis
since 2009, tumbling across the Midwest and Gulf Coast.