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Gasoline stocks at two-year low have refiners increasing

runs

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CVR, Valero increase fourth quarter utilization rates

By Erwin Seba

HOUSTON, Nov 8 (Reuters) - U.S. oil refiners this

quarter expect to run their plants at above 90% of their crude

processing capacity on low inventories and improving demand for

gasoline and diesel, executives and industry experts said.

Run rates in the year's final quarter tend to cool after the

end of the U.S. summer driving season. But weaker than usual

fuel inventories are encouraging high run rates even amid weaker

profit margins, analysts said.

Top refiners laid out plans to run their networks at between

90% and 94% of capacity through the end of the year, executives

said during earnings calls in recent weeks. That range is

slightly above the year-ago level.

"This is a little bit less of a seasonal decline than we

have seen in previous years," said Matthew Blair, chief refining

analyst at financial firm Tudor Pickering Holt. "Despite lower

gasoline margins, U.S. refineries are generally still

cash-positive. In addition, product inventories are relatively

low."

Refiners' operating margins fell this year as new refineries

in Asia, Africa and the Middle East came online, boosting global

supplies as demand growth weakened.

Top U.S. refiner Marathon Petroleum ( MPC ), which operates

16% of the nation's 18.4 million-barrel-per-day processing

capacity, plans to operate its 13 refineries at 90% of their

combined capacity, similar to a year ago.

"The global macro environment continues to exhibit refined

product demand growth," said Marathon CEO Maryann Mannen.

HIGH RUNS, LESS MAINTENANCE

The second largest independent refiner, Valero Energy ( VLO )

, expects to run at up to 94%, executives said, after its

refining profit tumbled in the third quarter. CVR Energy ( CVI )

also will increase its run rate despite sharply lower

third-quarter earnings.

Phillips 66 plans on running at a combined operating

rate in the low-to-mid 90s percentage range, executives said.

Smaller refiners Par Pacific ( PARR ) and HF Sinclair ( DINO )

both plan to reduce their run rates this quarter.

But for all U.S. refiners, "the upper end of the range is

very strong," said Kpler lead Americas oil analyst Matt Smith.

"It continues the trend we saw in the second half of this year

with high runs and shallow maintenance" levels.

"If you're still making money on the incremental barrel, if

the margin is still above the operating cost, you're going to do

it," said analyst John Auers, managing director of consultancy

Refined Fuels Analytics.