Please Explain Refinery Runs

T

tommo

I read a fundamental report on the Energy markets today that reads "US refinery runs will continue to remain low (reducing crude oil demand).

Could someone please explain what refinery runs are, i understand it to be the amount of oil that runs through the refining process and therefore how this relates to low crude demand?

I would imagine low runs are because of low demand rather than the other way around,

many thanks
 
Generally speaking, when they refine a barrel of oil, they yield 2/3rds a barrel of gasoline and 1/3rd distillate (heating oil, jet fuel, diesel, etc). It can get much more complex than that, but for this exercise, that is all you need to know.

Refining utilization is/has been running at low levels now for quite a time as demand for the finished products is way down as well. I think it is somewhere near 80% utilization, meaning that they could use another 20% more crude than they currently are, yielding 20% more finished product.

So when they say runs are low, that just means crude demand for US refining is low, which is directly a result of low demand for the finished product. In other words, if a facility could refine 100,000 barrels of oil a day and are running it at 80,000 barrels, the run is low. Stockpiles are high across the board.
 
It is a capacity utilization measure and is normally reported as a percentage with 100% being maximum capacity. FWIW refiners have been lowering their runs and supply has still been building. Demand is still falling, so there is little to no profit margin in refining at the moment.
 
Different refined products require different equipment set-ups: namely pumps, distillation columns, and catalyst beds. Since there is so much seasonality between certain high-demand refined products like heating oil or gasoline, and so much differentiation between equipment set-ups, production processing 'runs' take place since it is way too expensive to build an entire refinery for a certain type of distillate and let it perform below capacity for any period of time.

Kinda like a factory that makes Barbie dolls and GI Joes - difficult to switch back and forth except for the transvestite model (low demand, I would assume).
 
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