MOSCOW (MRC) -- Global refinery crude intake is recovering but it lags behind the demand increase due to high inventories, reported S&P Global with reference to the International Energy Agency's statement Aug. 13.
In the second quarter, global refining throughput fell 11.5 million b/d year on year to 69.5 million b/d "the lowest quarterly level in 17 years."
However runs returned to monthly growth in June, "putting the global refining industry on a recovery track, which is expected to be a long and arduous journey," the IEA said.
The pace of demand and refining rebound in China was "one of the unexpected developments" in Q2, as coronavirus lockdowns were lifted, the agency said in its latest report. It expects China to fully offset the Q1 declines by August and for the whole 2020 to be "the only country registering any significant year-on-year growth."
The agency estimated global July crude runs at 3.7 million b/d above the "low point" in May when runs totaled 68.7 million b/d. By the end of 2020, refinery runs are expected to ramp up by another 5.6 million b/d although overall will decline by 6.9 million b/d in 2020 to 74.8 million b/d.
Runs are forecast to rebound by "only" 4.5 million b/d next year to 79.4 million b/d. They will be 2.7 million b/d "below the historical peak seen in 2018."
IEA sees "more existential threats in the near future" for refining assets, as new capacity additions are further exacerbated by declining profits in trading operations, which have provided a "cushion" thanks to the Q2 "super-contango in the crude oil market."
Some US refiners have decided to close their sites or transform them into terminals or biodiesel plants. Marathon said it is indefinitely idling its 26,000 b/d El Paso, Texas, plant and its 161,000 b/d Martinez, California, plant, two refineries shut when demand first crashed due to the pandemic, and is evaluating re-purposing Martinez into a 48,000 b/d renewable diesel plant. In Europe, Total may convert its 101,000 b/d Grandpuits refinery into a bio plant.
The IEA said the performance of middle distillate cracks had "helped boost refinery margins worldwide" and in Europe, Brent cracking margins increased in July for the first time in three months. Singapore Dubai cracking margins also benefited from middle distillates and the fuel oil complex, but mostly from weaker freight and the easing of sour versus sweet crude prices "to the detriment of Dubai", the IEA said. In the US, Midwest margins "remain in the high single digits, better than anywhere else."
As MRC informed before, US crude oil inventories moved sharply lower during the week ended July 24 as exports and refinery demand climbed to multi-month highs, US Energy Information Administration data showed July 29. Commercial crude stocks fell 10.61 million barrels to 525.97 million barrels that week, EIA data showed. While the draw pushed stockpiles to 14-week lows, they remained more than 17% above the five-year average for this time of year.
Earlier this year, BP said the deadly coronavirus outbreak could cut global oil demand growth by 40 per cent in 2020, putting pressure on Opec producers and Russia to curb supplies to keep prices in check.
And in September 2019, six world's major petrochemical companies in Flanders, Belgium, North Rhine-Westphalia, Germany, and the Netherlands (Trilateral Region) announced the creation of a consortium to jointly investigate how naphtha or gas steam crackers could be operated using renewable electricity instead of fossil fuels. The Cracker of the Future consortium, which includes BASF, Borealis, BP, LyondellBasell, SABIC and Total, aims to produce base chemicals while also significantly reducing carbon emissions. The companies agreed to invest in R&D and knowledge sharing as they assess the possibility of transitioning their base chemical production to renewable electricity.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
MRC