If you think 2015 was a difficult year for the oil patch, 2016 is shaping up to be even more difficult for the refiners.
In the recently released EIA STEO (Short Term Energy Outlook), the EIA is forecasting some tough times for the refining sector of the oil business. Yes, we have to take the EIA forecast with a grain of salt… by itself, this might be “dismissable”, but when my forecast mirror theirs, I start taking notice.
In their November forecast the EIA lowered their 2016 forecast for margins for the US refining sector: Gasoline down 23%, diesel up 4% and jet up 2%. The lowered Gasoline margin is the issue as gasoline makes up around 46% of U.S. demand.
The attached chart is my forecast (based on Oct 2015 data) for 2016. The EIA’s forecast is similar.
So while the refiners crude cost will be relatively stable for 2016, ($38 – $48/bbl) the lowered product revenue is going to hurt. Remember the old adage “when the refiners are happy, everyone is happy”… and the reverse will be the same.
While no one likes bad news, at least you can put it into your planning calendar to consider.