July 31, 2020 / 3:29 PM / 3 days ago

PBF Energy sees jet fuel demand capping industry-wide refinery runs

July 31 (Reuters) - Depressed demand for jet fuel could cap refinery utilization rates across the entire industry, according to executives at PBF Energy, the fourth-largest U.S. oil refiner by capacity.

Demand for gasoline and distillates has recovered by 80% to 90% since the worst of the coronavirus pandemic, but jet fuel demand has only rebounded 30%, according to the Energy Information Administration. Because refineries cannot make products like diesel without producing jet fuel as well, they will restrain output, PBF Chief Executive Thomas Nimbley said on Friday.

"I'm not convinced that we could get to full utilization in this industry if jet demand is where it is today," Chief Executive Thomas Nimbley said on an earnings call.

Running refineries at full tilt would reduce the ability for refiners to contain the production of jet fuel.

Other independent U.S. refiners are running near 80% utilization, but PBF is still operating below that and will continue to do so until it sees demand return in key markets, Nimbley said.

Executives defended the company's acquisition of Shell's refinery in Martinez, California, despite reporting gross margins of only $1 million in the second quarter in the West Coast.

"We had negative cracks in April, which severely impacted our earnings on the West Coast," Nimbley said. Gasoline demand rebounded in recent weeks in California, he said, and physical crack spreads were approximately $13 in San Francisco and Los Angeles earlier this week.

Nimbley disagreed with the idea that California has too much refinery capacity. "I think we're going to be fine in California over the long haul," he said.

However, he noted that the pandemic will result in a permanent reduction in U.S. refining capacity.

PBF reported adjusted loss per share of approximately $3.19, missing analysts expectations. (Reporting by Laura Sanicola; editing by Grant McCool)

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