Higher crude runs through Northwest European refineries after relatively strong margins in recent days has prompted a decline in buying interest for refinery feedstocks vacuum gasoil and low sulfur straight run, trading sources said Thursday. Strength in product cracks and a backwardated product market have lead refiners to increase their crude runs. This was in turn reducing their need for feedstocks to process while increasing output of those feedstocks, sources said. "Refiners want to run max now...refineries have more LSSR, more VGO and more fuel oil, they will keep running until [margins are] very negative," a feedstocks trader said. "People have increased runs. Probably demand for feeds and VGO will be off in the short term. There are a few [feedstocks] barrels struggling," another trader said. VGO and LSSR are produced by vacuum units and crude distillation units respectively. When crude runs fall, refiners seek LSSR as an alternative to crude for processing in CDUs, vacuum units or in crackers units. VGO is run through cracker units to produce gasoline and gasoil. Poor crude margins can lead to refiners cutting crude runs and buying VGO for processing in cracker units. On Wednesday, high sulfur VGO cargoes on a FOB NWE basis were assessed $2.80/barrel above the front-month ICE Brent futures with LSSR FOB NWE cargoes assessed at a $0.90/b discount to front month ICE Brent futures. This represents a fall of $0.10/b for HSVGO cargoes and a $0.33/b fall for LSSR from Tuesday.

Source