The worldwide oil refining sector is going through a reckoning from falling fuel demand that’s the deepest and fastest ever.
Within weeks, the business will need to cut production by 30% or more because the coronavirus pandemic keeps much of the world at home with little need to drive or fly. Smaller and financially weak oil refiners may not cope with the crisis, say refining consultants and merchants.
Plant closings and production reductions are appearing across the globe. In Amsterdam, Canada, India, Italy and South Africa, small refiners have stopped processing. Even the most advanced and profitable U.S. and European operators are chopping runs to produce as little fuel as possible without closing down.
The coronavirus pandemic has cut global gasoline demand by 50% and jet fuel demand by 70%, based on consultancy Facts Global Energy.
Almost v5 million barrels per day (bpd) of the 18 million bpd U.S. refinery capacity would function if plants had been to produce sufficient fuel for present demand, stated Michael Tran, commodity strategist at RBC Capital Markets. In contrast, diesel production and margins have dropped solely slightly this year.
In Northwest Europe, refiners that binged on sweet crude are cutting 2 million barrels per day from run-rates, stated Jan-Jaap Verschoor, an analyst at Oil Analytics in London. He forecast the plunge in oil processing worldwide has already reached 5 million bpd.