MOSCOW (MRC) -- Expectations for a slow post-pandemic fuel demand recovery, which already shut down 2 MMbpd of refining capacity in 2020, will limit owners options in the future, said Hydrocarbonprocessing.
Demand erosion in 2020 for products like jet fuel, coupled with a weak outlook, means many closed refineries won’t go back to running crude, said Joseph Israel, president and CEO of Par Petroleum. “If you look at the recent months, the refinery closure list is pretty long, about two million barrels per day around the world,” Israel said during a Reuters Events Downstream conference in November.
Surviving refineries need to have a built-in flexibility to change the yield to maximize products that still have demand. The built-in flexibility also means capacity to run different grades of crude, he said. "Some refineries are not fortunate to have this flexibility," Israel said.
Some refinery owners “don’t have the balance sheet to hold and wait for better days,” he added. Par Pacific, which owns Par Petroleum, lists in its website 208,000 barrels per day (bpd) refining capacity in plants in Hawaii as well as in the Rockies and the Pacific Northwest. Its New York-listed shares traded in mid-November at less than half of where they were a year ago.
Total world crude oil demand was about 100 million bpd in 2019, roughly aligned with supply. The expectation at the time was for demand to grow along with increased economic activity. Before Covid-19, the projected world demand growth was for a 6 MMbpd increase in 3 years. Then demand for oil dropped by 20 MMbpd in the month of April or about 20% of the total, he added.
Many refineries had no option but to idle, he said. Some of these refineries that shut down in 2020 “will become terminals, some of them will become renewable diesel or biofuel plants,” Israel added.
Since the start of the pandemic, statistics related to Covid-19 hospitalizations in the world “only got worse month by month,” Israel said. Until the second quarter, oil demand deteriorated along with the intensification of the pandemic.
However, since about mid-year “oil demand took the other direction, and improved month by month” even as the pandemic continued to intensify, he added. “So in September-October we’re already back to 95% of pre-Covid numbers.” Nevertheless, the consensus for the oil demand loss in 2020 is likely to be about 8.5 MMbpd worldwide, he added.
In 2020, “emerging economies lost 3.3 MMbpd and you can see the U.S., Europe and all the industrialized countries with the same dynamic,” he said. The 2020 loss also included “3 MMbpd of gasoline demand, 3 MMbpd of jet fuel demand, and 1.7 MMbpd of diesel demand,” he said.
Early in the pandemic, as lockdowns were imposed, “gasoline got hurt the most and then from that point the recovery was the fastest,” he added. As for diesel, it has felt an impact correlated with economic growth. “The jet fuel loss this is definitely by far the worst impact and also the most consistent,” he added.
Pre-Covid there were 110,000 to 125,000 flights per day with that dropping to only 35,000 in the spring,” he said. It has only recovered to about 60,000 to 65,000, with international flights hit the most, he said. “So if you are an oil producer and you see 8.5 MMbpd of demand evaporating you have to do something,” Israel said.
As MRC informed earlier, Asian refining margins for jet fuel inched higher on Monday, but reimposed travel restrictions in several countries to slow the spread of a highly-infectious coronavirus variant is expected to dent passenger demand recovery. Refining margins, also known as cracks, for jet fuel ticked up USD0.05 to USD4.76/bbl over Dubai crude during Asian trading hours.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's DataScope report, PE imports to Russia decreased in January-November 2020 by 17% year on year and reached 569,900 tonnes. High density polyethylene (HDPE) accounted for the greatest reduction in imports. At the same time, PP imports into Russia increased by 21% year on year to about 202,000 tonnes in the first eleven months of 2020. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
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