The refining industry is witnessing the end of the supercycle of huge profits and record margins that began with the post-pandemic surge in demand and war- and sanctions-related supply disruptions.
This year, weaker Chinese economy and fuel consumption, a wave of new refining capacity in the Middle East and Africa, and underwhelming demand in developed economies have depressed refining margins to multi-year lows.
Profits at U.S. refiners have been much lower this year as refining margins slumped from record highs in the previous two years.
The end of this year’s summer driving season led to weak margins across Asia, while weaker fuel demand and economic growth in China also weighed on refining profits.
Refining margins across Asia fell in the first week of September to their lowest level for this time of year since 2020, which could lead to more curbs on run rates at Asian refiners, including in China.
Refining margins in Europe are also under pressure, and reports have it that Repsol in Spain and Eni in Italy are considering cutting run rates.
Gasoline profit margins in Europe averaged $12.10 per barrel in August, a plunge of 61% compared to the same month in 2023, per LSEG data cited by Reuters.
Diesel margins are even weaker, with August profit margins down to their lowest since December 2021.
In Singapore, the complex refining profit margin and the gauge for Asia’s refining profits slumped this week to the lowest for the season since 2020, when the pandemic was depressing demand.
Massive new refineries, including Africa’s biggest in Nigeria, the Al Zour refinery in Kuwait, and Duqm in Oman, are also weighing on the profits of smaller refineries, especially in Europe.
Earlier this month, the owners of the Grangemouth refinery, Scotland’s only crude processing facility, confirmed the plant is set to close in the second quarter of 2025, as it has been struggling to compete with the new complex facilities in Asia, Africa, and the Middle East.
By Tsvetana Paraskova for Oilprice.com
