Good morning, here's what the Oilman has for you today:

• Refiners Plan Production Curbs amid Falling Margin …

• M&A Spree Still Going Strong in Shale Patch

• Tweet of the Day

Refiners Plan Production Curbs amid Falling Margins

U.S. refiners are planning lower production in the third quarter.

Demand will be falling after peak season, and margins will already be thin.

Propping up those margins

Earnings calls in the past couple of weeks suggest it’s a general sentiment.

Margins are low, and we need to push them higher, as the message goes.

To do that, the simplest way is to churn out less gas and diesel.

So that’s exactly what Valero, Phillips 66, and Marathon are doing.

They will be operating their refineries at lower utilization rates in Q3.

They will also be doing longer maintenance—a good idea even with higher demand.

How long until Congress Dem accuses them of price gouging?

In fairness, the cuts won’t be particularly massive.

Marathon plans a rate cut from 97% to 90%.

Phillips 66 will cut its utilization rate from 98% in Q2 to the “low 90”.

Valero will be cutting throughput from 3 million bpd to 2.86 million bpd.

It’s a supply response to the demand situation.

Demand can yet surprise to the upside

A decline in fuel demand in the third quarter is seasonally normal.

Summer’s the peak, then it starts falling gradually, to rebound around the holiday season in winter.

But you never know, and demand may surprise with strength.

After the EIA’s massive underestimation of oil demand in May, anything seems possible.

And this means refiners won’t have to cut output for very long.

Of course, a surprise to the downside is also a possibility.

That would be a bummer for the downstream industry.

M&A Spree Still Going Strong in Shale Patch

Mergers and acquisitions in the shale patch recorded another strong quarter.

They’re now on track for another record year.

All this while the rest of the world doesn’t want to buy anything.

Ripe for more consolidation

Last year, the megadeals between Exxon and Pioneer, and Chevron and Hess helped push total M&As to $234 billion.

This year is shaping up to be similar.

Well, maybe without Exxon and Chevron deals.

But there are still plenty of large deals being closed.

Per Enverus, there have been 12 deals of over $1 billion since January.

That’s quite a lot: last year’s total in over-$1-billion deals was 19.

And it’s only August now.

One notable development is that deals no longer focus on the Permian only.

Last year, the Permian ruled.

Now, M&A appetite is spreading to the Eagle Ford, the Bakken, and the Uinta Basin.

These are the locations of some pretty big deals.

Maybe they just ran out of acreage for sale in the Permian.

It and the Midland Basin accounted for only 7% of deals in the second quarter.

The Uinta Basin may be worth watching—it saw an acquisition deal worth $2.5 billion.

When will it all end?

It looks like the momentum behind shale consolidation is going strong.

Eventually, it will start slowing.

This will either be when shareholders have enough or when regulators say it’s enough.

Antitrust authorities are already sniffing around for violations.

But once the upstream M&A frenzy ends, it will be time for an oilfield service frenzy.

So watch out for that, too.

Tweet of the Day

Thanks for reading today's Oil Patch!

Stay oily, my friend.

Two quick requests before you go:

• If you found this useful, forward this email to a friend to spread the word. 👇

• Take 1 second to answer the poll below 👇👇