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 (bpd) 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 bpd 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.