Oil Refiners Reveal Hints About Expected Boom

Oil refiners are getting ready for a boom. The plants in Europe and the US are scaling back planned maintenance later this year in anticipation of a surge in demand and fatter margins as the shipping industry gets ready for a historic fuel switch.

According to Bloomberg, analysts say a similar picture is emerging in Asia, too.

Refiners in the Mediterranean and Northwest Europe so far arranged to take about 60% less capacity offline for routine work from September to November than they did a year earlier.

There has been a similar plunge in planned US work. Even though more maintenance will come to light, most industry observers are nonetheless expecting fewer shutdowns.

The rush to refine during what’s normally a fallow period for the industry is a response to the introduction in January in 2020 of rules to cut sulfur emissions from the shipping industry.

The switch is forecast to send prices soaring for fuels that allow owners to comply with the regulations, according to the International Energy Agency. The measures are widely expected to create a profit surge for some refiners.

“We are seeing, not just in Europe but also in other regions, that refinery maintenance is definitely being front-loaded towards the spring rather than the autumn,” said Jonathan Leitch, London-based research director for refining and oil product markets at Wood Mackenzie Ltd.

“We think that refiners will be trying to maximize their production of middle distillates in the second half of the year.”

Refineries typically plan maintenance in the spring and autumn in order to gear up for stronger fuel demand in the summer and winter months.

source: Financial Tribune