Lower Crude Prices May `Improve Refining Economics,' OPEC Says

By Nidaa Bakhsh

Aug. 15 (Bloomberg) -- Refining margins may improve with lower crude oil prices, which have fallen from an all-time high last month, according to the Organization of Petroleum Exporting Countries.

``The recent sharp fall in crude oil prices may help improve refining economics and cap discretionary cuts by refiners,'' OPEC said in a monthly report today. Lower input costs make it cheaper to produce fuels such as gasoline and diesel.

High crude prices, which hit a record of $147.27 a barrel on July 1 on the New York Mercantile Exchange, led to run cuts at refineries in Europe and the U.S. as fuel prices lagged behind oil. In Europe, Brent crude on London's ICE Futures Europe exchange rose 41 percent from the start of the year until mid-July. Gasoline increased 32 percent during the same period, according to data compiled by Bloomberg.

ConocoPhillips reduced operating rates at its Wilhelmshaven plant in Germany in the second quarter because of weak margins. The lower rates were expected to continue into the third quarter, the Houston-based company said during its second- quarter earnings conference call on July 23.

Refining margins, or the profit of turning a barrel of oil into fuels, fell to $3.23 a barrel in July from $5.69 a barrel in June for facilities using West Texas Intermediate oil along the U.S. Gulf Coast, OPEC said in the report. European margins slid to $1.39 a barrel from $1.56 a barrel in June.

To contact the reporter on this story: Nidaa Bakhsh in London at nbakhsh@bloomberg.net