BP plc BP has reportedly reduced production rates at its three largest refineries in the United States. The company has decreased rates by 10-15% due to reduction in storage capacity, triggered by the coronavirus pandemic. Demand for refined products has fallen significantly, as consumers are staying indoors to maintain social distancing, in order to avoid getting infected by the virus.
The reduction of production rates has been imposed at the British energy giant’s Whiting refinery in Indiana, which has 430,000 barrels per day (BPD) of capacity. Its Cherry Point facility in Washington with 242,000 BPD capacity and the plant in Toledo, OH with 155,000 BPD capacity have also reduced rates.
In the last reported quarter, BP’s downstream profits declined to $1,438 million from $2,169 million in fourth-quarter 2018 due to lower refinery throughput outside the United States and Europe. However, total refinery throughput increased to 1,847 thousand barrels a day (MBbls/d) from 1,666 MBbls/d in the prior-year quarter. Total sales volumes of refined products rose to 6,263 MBbls/d from 5,916 MBbls/d in the year-ago period. Refining availability was 95.7% compared with 95.6% in the year-earlier quarter.
Global demand for gasoline and jet fuels is expected to further decline, as travel bans and lockdowns have been implemented in most of the virus affected countries. This is expected to result in rate cuts at refineries around the world. With the recent production cut, BP joins other companies like Valero Energy Corporation VLO, Phillips 66 PSX and PBF Energy Inc. PBF that have done the same. All these companies have huge refining activities.
As the demand for energy products is decreasing, some refiners like Valero are utilizing their ethanol plants to produce hand sanitizers on a large scale to help local communities fight against the virus outbreak. With shooting up of demand for sanitizers at hospitals and households, the market has witnessed a shortage in its supply in the last few weeks. As such, Valero has received approval from the FDA to produce ethanol-based hand sanitizers and commenced production in its facility in Hartley, IA. It plans to start production of hand sanitizers at 13 other facilities.
BP, which currently has a Zacks Rank #5 (Strong Sell), has plunged 34.5% year to date compared with 39.2% decline of the industry it belongs to.
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