The oil market is cyclical. Demand seasonally ebbs and flows, and producers adjust their output levels accordingly. Refiners are consequently impacted. Falling demand forces them to reduce their operations or fill-up stocks. These downstream companies, however, have to deal with another cyclical task, which is maintenance. Of course, some kind of flexibility is provided for them, which was conspicuous in 2022 – 2023. Last year’s turnaround in the U.S. was largely postponed, simply because the outbreak of the Ukrainian war sent crack spreads sky high, and domestic refiners were all too willing to take advantage of the situation.

Maintenance, however, could not be delayed indefinitely, and the time to carry out essential works arrived during the previous two months as crack values consolidated. The turnaround period is on display on the chart above – weekly inputs of crude oil into U.S. refineries fell from 16.8 mbpd at the beginning of September to 15.3 mbpd by the end of October. Refinery runs declined from 94% to 85% during the same period.

It is intriguing but not surprising to observe that the reduced demand for crude oil resulted in the weakening of the WTI structure. The premium the first month of the U.S. benchmark commanded over six months out collapsed from $10/bbl in September to $3/bbl by the end of last month.

A reversal, at worst a partial one, might just be around the corner. As the maintenance period has come to an end refiner’s thirst for crude oil might be on the ascent again, something that is confirmed by latest projections (from researcher IIR Energy). U.S. refinery offline capacity is estimated to plunge from 2.433 mbpd in the middle of October to a mere 743,000 bpd by the second week of November. Admittedly, the outright and spread price of WTI is affected by several factors, however, as refinery demand gains traction again at least one of these elements will be deemed constructive.