Dubai PR Network, Online Press Release from Dubai and Middle East
 
Business, Banking and Investments(Banking & Investments)
Filter PR by
  
Global Energy Weekly: Refiners double down on low margins
 
Key takeaways 
 
•         Covid forced historic refinery run cuts in 2020, and though utilization rates remain low, margins are still trending near $0
•         Oil demand may take 2-3 years to recover, but the refining sector is set to add >6mn b/d of net capacity over the same period
•         Cracks face a long recovery and may cause more refinery closures, yet we see upside to summer 21 RBOB cracks on strong demand
 
 
 
Covid created excess refining capacity, weakened cracks… 
Oil demand was up-ended this year as Covid ravaged the globe, causing some of the highest value refined products like gasoline and jet fuel to trade below crude oil prices. Refiners responded quickly to negative cracks and refining margins, cutting runs by roughly 12mn b/d YoY during 2Q20. Even after refiners took such drastic measures, refined product inventories ballooned and now loom over the recovery in the petroleum complex. Refinery margins remain near zero across most regions even as refinery utilization rates remain ~10% below year ago levels. 
 
…yet new refinery starts are set to surge during 2021-23…
As the market ponders how to work though the existing refining capacity overhang, new greenfield refineries are starting up around the globe. From 2021-23, refining capacity is set to rise more than 6mn b/d unless new refinery closures are announced. Most of this capacity growth comes from the Middle East and Asia. Collapsing light-heavy spreads and strong fuel oil and naphtha cracks have leveled the playing field for simple and complex refiners and open up the possibility of closing capacity that was previously advantaged. The current situation, where all refineries are hurting, may draw out the capacity rationalization process.
 
…and demand may take 2-3 years just to reach 2019 levels
When the dust settles, 2020 oil demand will have fallen on average nearly 10mn b/d YoY, led by the transport fuels (see Oil demand: down but not yet out). In 2021, we forecast a rather quick rebound in road fuel demand and see a longer recovery for jet fuel. For gasoline, we forecast demand to fall 3mn b/d YoY in 2020 and rebound nearly 5mn b/d in 2021 as people opt to drive over flying or taking public transit. Diesel demand held up relatively well in 2020, but jet fuel will delay the full recovery for middle distillates until 2023. In aggregate, oil demand could take 2-3 years to reach pre-Covid levels, but this will be heavily dependent on when a vaccine is readily available.
 
Margins face a long recovery path, but gasoline has upside
In Covid's aftermath, we expect diverging trends for refined product cracks. Remarkably strong driving activity next summer should push gasoline cracks above the forward curve. 2021 diesel and gasoil cracks sold off more than $12/bbl since the start of the year and we think they will remain near current depressed levels as the market continues to blend excess jet fuel volumes into the diesel pool. Finally, we expect low sulfur fuel oil cracks (1%) to weaken throughout 2021 as refinery runs continue to recover. However, increasingly complex refinery capacity should limit the growth in fuel oil supply, and so we take a more optimistic view on LSFO cracks versus the forward curve.


Posted by : Dubai PR Network Editorial Team
Viewed 6082 times
PR Category : Banking & Investments
Posted on : Tuesday, October 20, 2020  10:21:00 AM UAE local time (GMT+4)
Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of DubaiPRNetwork.com.
Previous Story : UK Fintech Major Paymentology Enters the Middle East's $200 ...
Next Story : Zoho Partners with Business Network International to Digital...
Email this article Print this article

Share this article with your friends and followers
NewsVine
Back to Section Home

Related Stories



 
 
Most Viewed Press Release posted in the last 7 days
RISE Worldwide Wins Multi-Faceted Mandate for Abu Dhabi T10 [26982-Views]
GEMS World Academy – Abu Dhabi set to move to brand-new campus on Al Reem Island in Septem... [21837-Views]
FINA World Swimming Championships [21115-Views]
Samsung Announces Official Galaxy Z Series Availability Across the UAE [16990-Views]
UAE Ministers Announce the First Set of “Projects of the 50” [6129-Views]
Kristina Fidelskaya — Fall Blues, Sixties Floral Print, & Retro-Inspired Ruffles [5744-Views]
Eureka Forbes Coronaguard Achieves 94.9% Reduction in Covid-19 Virus [4936-Views]
Timeless with Mouawad [4662-Views]
Corniche Hospital Helps Women Suffering From Chronic Conditions Resume Normal Lives [4510-Views]
Secretary General of the Environment Agency – Abu Dhabi Highlights the Importance of Colle... [4326-Views]
Dubai Municipality wins Asia Pacific award for Best Project Management Office [4293-Views]
Modest Forecast for the GCC Food Sector, as Pandemic Strengthens Focus on Local Production [4198-Views]
Etihad Airways Fly the UAE Paralympic Champions Home [4079-Views]
LG Announces Global Startup Competition to Recruit New Businesses for Innovation Center [4075-Views]
TCL Launches C825 TV with Premium 4K Mini LED Performance [4067-Views]
GEMS Education Teacher Wins Brand New BMW X2 after Signing Up for an Emirates NBD Bank Acc... [4014-Views]
Max Factor X Priyanka Chopra Jonas: Matte Confidence Look [3965-Views]
Aerospace Leaders to Outline Future Roadmap of Industry at Dubai Airshow 2021 Conferences [3842-Views]
Curly Hair Girls Rejoice! Cult Haircare Brand SASHAPURE Launches in the Middle East [3792-Views]
GEMS schools win prestigious awards for Educational Excellence [3690-Views]
2022 Renault Koleos– The Contemporary SUV Reimagined [3555-Views]
New World 12s Rugby Tournament Launches, Aiming to Bring 250 Million Pounds Into the Glob... [3419-Views]
How Samsung's Wind-Free™ AC Keeps Your Home Comfortable, Cool & Healthy [3378-Views]
Sharjah's SCFA, Saudi Arabia's FAC Discuss Boosting Cooperation for Best Representation of... [3108-Views]
Hyundai Motor Group Presents Its Vision to Popularize Hydrogen by 2040 at Hydrogen Wave Fo... [3100-Views]
 
RSS Facebook Twitter LinkedDin DubaiPRNetwork.com on Instagram
 
Top Sections
 
Top Stories