By February 1, 2017 Read More →

Spike in maintenance expected to boost oil refining margins

Oil refining

Oil refining outages in the first half of 2017 will equate to nearly 1 million b/d more than the same time in 2016 and will help clear stocks of diesel, gasoline and jet fuel. Photo by Walter Siegmund.

Oil refiningĀ surgedĀ in past two years to take advantage of low crude prices

By Libby George

ANTWERP, Feb 1 (Reuters) – Increased refinery maintenance in Asia and the Middle East is expected to boost profits for operators in other regions in the first half of this year, market watchers said on Wednesday.

Refineries worldwide ran hard during the past two years to capitalise on low oil prices, with Chinese refineries processing a record amount of crude in 2016, meaning that some units now have no choice but to carry out maintenance.

Outages in the first half will equate to nearly 1 million barrels per day (b/d) more than in the same period last year, speakers told the Platts Middle Distillates conference in Antwerp.

Though this is likely to help to clear the stocks of oil products such as diesel, gasoline and jet fuel that poured into the world’s storage tanks over the past two years of excess, it is also likely to cut into demand for crude oil just as prices recover on the back of production cuts led by the Organization of the Petroleum Exporting Countries (OPEC).

Trading house Gunvor’s chief economist, David Fyfe, said that he expects “healthy and robust” refinery margins in the first half of the year.

Gunvor data shows that maintenance in February and March will take close to an additional 1 million b/d offline compared with the same months in 2016.

Both Fyfe and James McCullagh, oil products analyst with Energy Aspects, said the bulk of the work will be concentrated in Asia and the Middle East, offering a reprieve to Europe’s comparatively less advanced refineries, which have depended largely on demand — or supply problems — in other regions to underpin profits.

Energy Aspects expects Asian refineries alone to account for 900,000 b/d more in offline capacity in April, compared with the prior year, and 250,000 b/d more over first half of 2017. Those shutdowns, paired with diesel stocks in China that it estimates are near record lows, would underpin refinery profits in most regions, he said.

Fires and other issues at refineries worldwide this month suggest that many units are feeling the effects of the ramp-up in output over the past year or two.

“The strong margins have in a way stored up unplanned outages,” McCullagh said.

This month’s outages included Abu Dhabi National Oil Company’s Ruwais refinery, two refineries in West Africa and others in India, Indonesia and Brazil.

(Editing by David Goodman)

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