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Low demand for fuels to cap European crude refinery runs

June 29/2021

MOSCOW (MRC) -- A recovery in European jet fuel demand to pre-pandemic levels is years away, forcing regional refiners to continue blending the aviation fuel into diesel, and keeping a lid on their crude runs, consultancy FGE Energy said, as per Hydrocarbonprocessing.

FGE sees jet/kerosene demand in Europe at the end of 2022 reaching 75% of 2018-2019 levels only, meaning European refiners will continue to blend a large volume of jet into diesel to soak up the surplus. "Such blending tends to limit overall refinery crude throughput because maximum distillate hydrotreating capacity is reached at lower crude throughputs," FGE says.

Hydrotreating is a chemical process used in refining petroleum products to remove sulfur. "At this point, incremental crude runs would produce only naphtha, high sulphur gasoil and fuel oil Ц not a recipe for positive margins," FGE added.

The consultancy forecasts European jet demand not fully returning to pre-COVID-19 levels until 2030, but it will be very close to it from 2024-25 onwards. The collapse in fuel demand after major European economies went into lockdown to slow the spread of the coronavirus forced refineries that could no longer profitably run into capacity rationalisation.

FGE estimates that European refining capacity will shrink by 700,000 barrels per day (bpd) due to the closures announced for 2020 and 2021, with hydrotreating capacity falling by 200,000 bpd. This means European refiners will not return to their pre-COVID-19 annual crude run levels of 12.5 million bpd, FGE says, and forecasting runs to average 11.1 million bpd this year and 11.7 million bpd next year.

"The more jet that can be pulled out of the diesel pool (thus freeing-up diesel hydrotreating capacity) the more scope there is for refiners to increase throughput," FGE said. European diesel refining margins have remained under pressure, even as economies around the continent ease movement restrictions, to a large extent due to jet fuel blending, traders say.

Barge diesel margins in northwest Europe are trading at about USD5 a barrel, according to Reuters calculations, compared with over USD23 a barrel in March 2020.

As per MRC, global oil consumption is set to return to pre-pandemic levels by the first quarter of 2022, driven by a strong expansion in global manufacturing and freight transport as well as the gradual re-opening of major economies. Booming consumption from miners, manufacturers, shipping and trucking firms, as well as private motorists, is expected to offset the continued loss of jet fuel consumption from quarantine restrictions on passenger aviation. Global liquids consumption (including biofuels) is forecast to reach 100.6 million barrels per day (bpd) in March 2022, according to the US Energy Information Administration (EIA).

Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 744,130 tonnes in the first four month of 2021, up by 4% year on year. Shipments of all PE grades increased. At the same time, PP deliveries to the Russian market were 523,900 tonnes in January-April 2021, up by 55% year on year. Supply of homopolymer PP and PP block copolymers increased, whereas shipments of PP random copolymers decreased.
Author:Anna Larionova
Tags:diesel, petroleum products, crude oil, PP, PE, neftegaz, petrochemistry.
Category:General News
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