Importing is Light Sweet Sorrow

Last Tuesday, US Atlantic Coast refiner Sunoco announced its plans to exit the refining business by unloading its “unprofitable” refineries in Philadelphia and Marcus Hook, Pennsylvania. These refineries have a combined crude oil distillation capacity of over 500 kbd, and Sunoco has stated that if no buyers emerge for the facilities, they will idle the main processing units in July 2012. Over the course of this year, refiners on the US Atlantic Coast, especially those such as Sunoco with equipment designed to process mostly light, low sulfur crude oil, have struggled with depressed domestic demand for their products and increasingly dear prices for their raw materials. The rising cost of these quality barrels has been the largest factor souring Sunoco’s profits. Light sweet crude oil prices have been driven both by the cutoff of Libyan supply and increased global demand for streams to process into transportation fuels, particularly from Chinese refiners. For now, it is still business as usual for Sunoco and the market will likely continue to see volumes move to the US Atlantic Coast. The closure of Sunoco’s Pennsylvania refineries, if it does occur, would have an impact on the Suezmax trade in the Atlantic Basin but could result in an increased ton-mile effect as barrels are increasingly pulled to Eastern outlets. Download here