Top US refiners are poised to seek alternative sources for heavy, sour crudes, including running more domestic grades, as they await clarity around US President Donald Trump's threatened tariffs on imports from the nation's top crude suppliers Canada and Mexico, executives said.
Running more domestic crude, which is predominantly light, sweet shale oil, through US refineries could be a win for Trump, who has vowed to boost the nation's energy production and championed the fossil fuel industry.
Marathon Petroleum, the top US refiner by volume, said its refineries in the Mid-Continent region could switch from processing heavy sour crude to other grades.
“We could look to pivot to alternative crudes because of our logistics capabilities,” Rick Hessling, chief commercial officer at Marathon Petroleum, told investors during the company's fourth-quarter earnings call this month.
Hessling added that domestic crude from the Bakken shale formation in North Dakota and the Rocky Mountains could be among their options.
Ohio-based Marathon operates 13 refineries in the US, six of which are located in the Midwest. Its 253,000-bpd refinery in Robinson, Illinois, processes large amounts of heavy crude from Canada.
The refiner warned that costs could rise if Trump's tariff plans go through, but the burden would primarily be borne by Canadian oil producers and, to a lesser extent, US consumers.
Texas-based HF Sinclair, which operates seven complex refineries, could process more light sweet crude.
“What we believe in our refineries is we have the ability to lighten up,” Steve Ledbetter, executive vice president of commercial at HF Sinclair, said during the company’s earnings call on Thursday.
Its refining system is connected to the key crude oil delivery hub in Cushing, Oklahoma, Ledbetter added.
Independent refiner Delek, which operates four inland refineries, could run more light, sweet crude if it is economic to do so, its CEO Avigal Soreg said earlier this month.
“We have knobs to open,” he said, emphasizing that the company would do whatever was most economic.
TD analysts expect US refiners that run Canadian crude on the margin to switch to light sweet crude, thereby increasing the prices of US benchmark West Texas Intermediate crude futures (WTI) and global benchmark Brent crude. Both benchmarks are light sweet grades.
In the markets, oil prices extended gains on Friday, headed for a weekly increase, as falling inventories of US gasoline and distillate raised expectations of solid demand while concerns over supply disruptions in Russia lent support.
Brent futures climbed 16 cents, or 0.2%, to $76.64 a barrel by 0123 GMT. US West Texas Intermediate crude edged up 17 cents, or 0.2%, to $72.65.
Both benchmarks were set for a weekly gain of about 3%.
US crude oil stockpiles rose while gasoline and distillate inventories fell last week as seasonal maintenance at refineries led to lower processing, the Energy Information Administration said on Thursday.
“Drawdowns of US gasoline and distillate stockpiles, along with concerns over tight supplies in Russia, are supporting oil prices,” said Toshitaka Tazawa, an analyst at Fujitomi Securities.
“Expectations for a potential peace deal between Russia and Ukraine, which could ease sanctions on Moscow, have faded somewhat due to Ukraine's hardened stance, prompting some investors to buy back into the market,” he added.
