Risk of Mishap Increases at Busy Refineries
NEW YORK – The risk of accidents at oil refineries (search) in the United States is on the rise as plants, running near full-throttle, get worn down ahead of seasonal maintenance in the fall, energy analysts said Friday.
Fires broke out at two major oil refineries in the Gulf Coast Thursday, including BP (search)'s beleaguered refinery in Texas City. Experts said more problems could arise after months of soaring refining activity.
"This time of year you always have things blow up," said Bill O'Grady, analyst at A.G. Edwards in Chicago. "Refineries are getting stretched. Its part of the landscape."
Refinery outages can push up prices for gasoline heating oil and crude by cutting into stockpiles in America, the world's largest energy consumer.
Oil companies typically perform maintenance on refineries in the spring and fall, when demand is low. They generally run them at high utilization rates in the winter and the summer when demand is higher.
This summer, refineries have been running consistently over 90 percent of capacity to meet robust gasoline demand and to top off distillates stockpiles, like heating oil, ahead of the Northern Hemisphere winter.
"Refineries like to run full-out at this time of the year," said Jim Ritterbusch, analyst at Ritterbusch & Associates. "We're between two periods of seasonal maintenance, trying to build up distillates and keep up with gasoline demand."
"The good news is that these high refinery runs have given us a distillate supply surplus. But we've seen erosion in the gasoline surplus, and that surplus could be erased by mid to late August, especially with refinery snags."
BP said Friday it was investigating the cause of a fire in a hydrotreater unit (search) at its Texas City, Texas, refinery Thursday that shut 60,000 barrels per day of production.
The Texas City refinery, the third largest in the United States, was the site of a fatal explosion in late March that killed 15 workers and injured 170 others.
Also on Thursday, Murphy Oil (search) reported a fire at its Meraux, Louisiana, refinery, forcing shut an 18,000 bpd kerosene hydrotreater for an undetermined amount of time.
While neither incident was likely to have a significant impact on U.S. gasoline or distillate inventories, market watchers said they underscored the vulnerability of refineries at this time of year.
"We're at a stage now where if refineries are not running all out, we can't keep up with demand. We don't have any supply cushion to help cushion increases in demand," said Peter Beutel, analyst, Cameron Hanover.
U.S. gasoline and distillate supplies are in or above the average range for this time of the year, but demand has been holding strong in the face of high prices, keeping strain on the market.
Over the past four weeks, gasoline demand has averaged 1.6 percent higher than last year, while distillate demand has averaged 3.6 percent higher, according to government figures.