September 12, 2012:

NEW YORK -- Option trades continued to flow in Phillips 66 (PSX) Tuesday as oil refinery stocks remain active. The January 55 calls traded for 60 cents and 65 cents, with more than 10,000 crossing OptionMonster's real-time tracking systems. Those options lock in the purchase price of the stock, so they can generate some nice leverage if the stock rallies. If it doesn't, the calls will expire worthless in mid-January.  Phillips 66 shares rose 2.36% to $45.59 Tuesday and are up 40% in the last three months. Spun off from ConocoPhillips earlier this year, Phillips 66 is an independent energy company engaged in oil refining and marketing. Total option volume in the name exceeded 18,000 contracts, nearly four times its daily average. Fewer than 1,500 of those were puts, a reflection of the upside bias. Tuesday's bullish activity also came one session after similar trading in Hess.

By TheStreet.com

September 12, 2012:

Most oil refiners have enjoyed strong profit margins in the past couple of months but data released by the International Energy Agency Wednesday bluntly shows why many European companies have more of a struggle on their hands than their U.S., Asian and Middle-Eastern counterparts when the situation isn’t so rosy. In its monthly report, the Paris-based energy watchdog reintroduced its refinery margin calculations and also presented estimates of operating costs for refiners. “Operating costs are highly dependent on a number of key parameters, including size and complexity of the refinery, utilization rates, local wage expectations for refinery workers, employment and environmental regulations,” the agency said. These costs, excluding depreciation, amortization and the cost of refinery fuel such as crude, stand at $4 a barrel for northwest Europe and Mediterranean, at $3.30 a barrel for U.S. Gulf Coast and U.S. Midcontinent refiners and at $3 for Singapore companies, the IEA said.

The $1-a-barrel difference between Europe and Singapore may look insignificant when profit margins are good. However, when margins weaken due to expensive crude oil, something many analysts expect to happen if tensions escalate in the Middle East, and lackluster consumer demand for fuel prevents price rises, this one-dollar difference could become a key to whether or not a company breaks even. Profit margins are already tighter in Europe. According to the IEA, processing Brent crude oil into fuel in northwest Europe in August would have generated a profit margin of about $9 a barrel, compared with $35 a barrel for U.S. Midcontinent refiners, which have access to much-cheaper Nymex crude. As such a sharp rise in crude oil prices, without higher fuel prices due to weak consumer demand, would likely place European refiners in the red sooner than their U.S. counterparts. No surprise then that “European refinery closures completed or announced since the start of the economic downturn in 2008 now amount to 1.6 million barrels a day of aggregate capacity,” or about 13% of the capacity online in the third quarter of 2012, the IEA said.

“Another 150,000 barrels a day will be shed in the fourth quarter with the shutdown of ERG’s Rome refinery and as Exxon reduce capacity at its Fawley plant in the U.K. later this year,” the watchdog added.

By The Source

September 12, 2012:

Gulf Coast gasoline rose to the highest level this month as refineries remained shut or at reduced rates in the wake of Hurricane Isaac. Three refineries are still restarting after Isaac, a Category 1 hurricane, made final landfall in Louisiana on Aug. 29. The weather system caused flooding and power losses, closing seven refineries, representing 13 percent of Gulf Coast capacity, and reduced rates at other plants. The premium for reformulated, 87-octane gasoline in the Gulf Coast rose 2.75 cents to 20 cents a gallon versus futures traded on the New York Mercantile Exchange at 12:01 p.m. New York time, according to data compiled by Bloomberg. It is the highest level since Aug. 27. Prompt delivery rose 3.81 cents to $3.2367 a gallon. Restarts at Valero Energy Corp. (VLO)’s Meraux and St. Charles refineries are progressing as planned, Bill Day, a spokesman for the San Antonio-based company, said in an e-mail. “The crude unit at Meraux remains shut for repairs,” he said.

Motiva Enterprises LLC expects to need another week to start units at its Convent, Louisiana, refinery. The 255,000-barrel-a-day plant has been hampered by floodwaters and mechanical issues that prevented the fluid catalytic cracker from being restarted, two people familiar with operations said yesterday. The refinery shut Aug. 28 in advance of Hurricane Isaac. Motiva expects to return its Norco, Louisiana, refinery to normal operating rates by Sept. 15, according to two people familiar with the plant’s operation. The 250,000-barrel-a-day refinery, shut Aug. 30, is increasing production, they said.

By Bloomberg

September 12, 2012:

Three years ago, Utahns were worried about safety at the five oil refineries in northern Salt Lake and southern Davis counties. That concern followed a fire that injured four workers and an explosion that damaged dozens of homes near the Silver Eagle refinery in Woods Cross. The two accidents occurred within a single year, 2009. Earlier this month, a tank exploded at the HollyFrontier refinery, also in Woods Cross, sending an 8,000-gallon plume of crude oil over a mile-long swath of Davis County. No one was injured, and the oil apparently is not toxic But it created a sticky mess at countless homes. The fire and explosion in 2009 at Silver Eagle came the same year that a fireball erupted at the Tesoro refinery in Salt Lake City. Holly also had a big fire in 2008.

These incidents are just the worst in an ongoing series. The Salt Lake Tribune reported Sunday that on average there is a leak, spill, fire, blast or air-pollution violation every nine days at the five refineries. Many are minor, but some, obviously, are not. The job of overseeing worker safety — and by extension, public safety — at these plants falls to the Utah Labor Commission and one of its divisions, the Utah Occupational Safety and Health Administration. UOSH threw the book at Silver Eagle in the aftermath of its 2009 explosion, citing it for 71 violations, including problems with equipment, safety procedures and records. It levied fines of $1 million. But there must be continuing concern and oversight of safety going forward, particularly in light of the frequent violations highlighted in The Tribune’s reporting. In 2007, two years after an explosion at a Texas refinery killed 15 workers and injured 170, the federal Occupational Safety and Health Administration mandated inspection of all U.S. refineries within two years. UOSH is conducting those reviews in Utah. Records indicate it has completed inspections of three of the Salt Lake-area refineries, and has completed partial inspections of two others. Utahns have a right to expect that those inspections will be completed soon.

Meanwhile, the Holly, Chevron and Tesoro refineries all plan to expand capacity to process more wax crudes produced in the Uintah Basin. Utah is fortunate to have both domestic supplies of crude oil and local refining capacity. Like it or not, modern society runs on oil. But that does not mean Utahns should tolerate refinery risks that can be minimized by vigilant regulation, both within the refining companies and the state government.

By The Salt Lake Tribune

September 12, 2012:

SAN FRANCISCO — Mistakes were made by air quality officials in notifying the public about potentially dangerous pollution created by a huge fire at a Chevron Corp. refinery last month, regulators said Monday. The Bay Area Air Quality Management District held a public meeting in San Francisco to discuss its response and the myriad investigations into the Aug. 6 fire that started after a leak in an old pipe at the Richmond facility. Though Chevron and Contra Costa County also did air monitoring during the fire, the district was responsible for testing samples and determining if federal and state pollution standards were violated. If so, it was responsible for notifying county officials, who alert the public. The district initially said none of the monitors measured levels exceeding legal standards, and later recanted that assertion. More than 15,000 people sought medical attention for breathing complaints and eye irritation, though officials said only three required hospitalization.

Regulators also told those who attended the meeting that they are working to improve pollution monitoring during emergencies. District executive officer Jack Broadbent said the initial, incorrect assertion that all air quality samples taken near the refinery fire were safe "clearly fell short." "The public was suffering from this event," he said. The company has not set a timetable for when the crude unit that was destroyed by the fire will restart operations. The site is currently the focus of investigations by state and federal agencies, so access is strictly controlled. Gasoline prices in California rose sharply in the days after the unit was taken offline. Some analysts said the increase was due in part to the supply disruption caused at the state's third largest refinery. The average price for a gallon of regular gasoline in California on Aug. 7 was $3.86. On Monday, it was $4.15. The district is looking at deploying more air monitors near the refinery, and studying new, mobile air-monitoring stations that can be set up quickly during an emergency. Nigel Hearne, general manager of the refinery, said the refinery as a whole is still producing fuels, though at a reduced rate because of the loss of the crude unit destroyed by the fire. "Safety is our first business, and any comment to the contrary is incorrect," Hearne said.

Chevron had been working with the city of Richmond prior to the fire to build three, community air monitoring stations that will improve the ability of residents to know when air quality becomes dangerous, Hearne said. Once the new stations are up and running, Hearne said, a website will allow residents to find real-time pollution data. The refinery fire has also prompted Contra Costa County to look for a new contractor to run its emergency warning phone system. It took more than three hours for the phone system to call 18,000 people on the night of the fire, said Randy Sawyer, the county's chief environmental health and hazardous materials officer. "That should be shorter," he said.

By Huffingtonpost