Oil price rally and Saudi price increases could hurt refiners, stifling market recovery
Data from refineries across several regions shows weak margins, or "crack spreads" — the difference between the price of crude that refiners buy versus the price that the market is paying for the refined products.
A view of the Marathon Petroleum Corp's Los Angeles Refinery in Carson, California, April 25, 2020 after the price for crude plunged into negative territory for the first time in history on April 20.Oil prices pared gains on Monday, despite the weekend announcement by OPEC and its allies, known as OPEC+, that historic production cuts of 9.6 million barrels per day across the group would continue through July as the coronavirus pandemic continues to weigh on demand.
Very poor refining margins and the recent sharp decline in U.S. crude bases now comfort us in our sequentially bearish outlook."One word of caution is if we look at the rally we've seen in crude oil prices, it's been amazing, but the big uncertainty is if you look at refinery margins, they are very weak across the board across all regions," Warren Patterson, head of commodities strategy at ING.
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