US refiners facing gasoline glut take Venezuela hit

Bloomberg

America’s gasoline producers can run, but they can’t hide from a plunge in refining profit margins that sanctions against Venezuelan crude would only worsen, analysts said.
The biggest US refiners are expected to report strong fourth-quarter earnings thanks to profits from diesel processing in a strong US economy, as well as a drop of about 40 percent in crude prices. But that’s all expected to change this year as gasoline stockpiles surge, and a shortage of heavy crude from Venezuela wouldn’t make
refiners’ lot any easier.
“It’s really the first quarter that’s the big concern among investors right now,” Matthew Blair, an analyst at Tudor Pickering Holt & Co., said in a phone interview. “We’ve lost some of those crude differentials, diesel’s come down a little bit and gasoline is super weak.”
The spread between ben-chmark gasoline prices and oil futures, an indication of how profitable it is for refiners to produce the motor fuel, plummeted to $5.693 a barrel, the narrowest since October 2013. Demand for gaso- line in US has flatlined over the past two years while output is up. Refiners have been focussed on benefiting from better demand for diesel in a strong US economy.
But the combination of a shale boom, which contributes lighter oil, along with output cuts from Opec and Canada, which means less heavy oil, compounds the problem. That’s because light oil yields more gasoline than diesel, so as fuel producers seek to ramp up diesel production, they are piling up on excess gasoline. At the same time, a scarcity of heavy crude is making it more expensive and less lucrative to process.