MOSCOW (MRC) -- European oil refineries are ramping up precautionary measures as the coronavirus pandemic spreads around the continent and leads to national lockdowns, reported S&P Global.
Operations, for the time being, remain largely unaffected although many in the industry see run cuts and even closures on the horizon.
"Sooner or later they should shut down," a products trader said Tuesday.
Analysts agreed that refineries will need to curtail their throughput as demand slows.
"Run cuts are expected in Europe due to the demand effect from the coronavirus outbreak," S&P Global Platts Analytics said in a note. However, "refiners have not explicitly announced the degree of these cuts".
The reason refiners are putting off run cuts for the moment is because the recent sharp falls in crude prices has supported margins. But, as one crude trader said, "what margin exists does not matter if there is not a buyer for products".
Spain, which has been in lockdown since last weekend, has reduced all private travel to a minimum, while public transport and flights have been halved for a two-week period.
Italy has introduced unprecedented measures to combat COVID-19, banning residents from leaving their homes except for the most essential activities.
"Globally, we are looking at a pretty significant reduction in short-term oil demand, probably down 3-4 million b/d for several months," according to Stephen George, chief economist of energy consultancy KBC, who also saw the potential for "a general trimming of runs across the board in Europe".
As MRC wrote before, operations at Italian petrochemical producer Versalis have not affected by emergency quarantine measures in the country, a company spokesperson said last Thursday. "Versalis (Eni) confirms that operations are being carried on regularly. Since the emergency outbreak, the company has promptly put in place all necessary measures to protect its personnel's health," the company told S&P Global Platts in a statement. Versalis has three steam crackers in Italy, capable of producing 1.675 million mt of ethylene, 750,000 of propylene and 285,000 mt of butadiene a year.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 215,390 tonnes in the first month of 2020, up by 23% year on year. Shipments of all grades of high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) increased due to higher capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 127,240 tonnes in January 2020, up by 33% year on year. ZapSibNeftekhim's homopolymer PP accounted for the main increase in shipments.
MRC