September 30, 2023

The Queens County Citizen

Complete Canadian News World

Oil refiners are struggling with weak demand and inventory food around the world

MELBOURNE / LONDON / NEW YORK (Reuters) – Global oil refiners are pushing back months of poor demand and depleting energy production in the autumn as inventory plummets, officials, refinery workers and industry analysts say demand recovery from the coronavirus impact has stalled.

Pumpjacks are seen against the setting sun in the docking oil field in Heilongjiang Province, China. December 7, 2018. Image taken December 7, 2018. REUTERS / Stringer / Files

Refiners cut production by 35% in the spring as coronavirus lockdowns destroyed the need for travel. As lockdowns eased, refiners slowly increased production by the end of August. Refiners, the top energy consumers in the United States and elsewhere, have been cutting rates over the past few weeks in response to a growing list, a persistent lack of demand and a response to natural disasters.

The hit to efficiency is very important in China. The spread of the coronavirus, the second largest energy consumer, has led the world in oil demand recovery. But its refineries also export fuel and those goods are weak due to the impact of the virus on fuel demand in other Asian countries.

China refineries are expected to cut runs by 5-10% in September, led by PetroChina, compared to August, as Chinese refiners are stagnating with higher fuel inventories and export margins.

“The effects of COVID-19 … are putting a lot of pressure on the refining business that we have not experienced before and have not been sustainable in the long run,” Australian energy supplier Viva Energy Group Ltd chief executive Scott Wyatt said earlier this month.

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Inventories of distillation consisting of diesel, jet fuel and heating oil, which usually begin to build before winter, are shining this year, leading to a poor outlook for refinery margins in the coming months.

The U.S. Energy Information Administration says U.S. energy demand is down 13% year-on-year. Autumn is generally when the use of heating oil and diesel increases, but with a storage of more than 179 million barrels, with almost a record, refiners are no longer encouraged to run units.

The Paris-based International Energy Agency cut its forecast for global oil demand in 2020 for the second time in two months last week. The Energy Watchdog estimates that global consumption of petroleum and liquid fuels will average 91.7 million barrels per day for the whole of 2020, down from the previous estimate of 200,000 bpd and 8.4 million bpd from 2019’s 100.1 million bpd.

U.S. refineries are producing 20% ​​less fuel than before the epidemic. Refineries of Chinese, Indian, Japanese and South Korean have reduced their consumption rates since July and August.

“Even with the U-shaped economic recovery, demand will be less than 2 million bpd in the fourth quarter of 2019,” Argus chief economist David Fife said in a webinar earlier this month.

During the periodic maintenance between September and November Asian energy production will further decline and many facilities around the world will be closed.

Average consumption rates in Chinese state-owned refineries stood at 78.6% at the end of August, down 3.6 percentage points from July, according to data compiled by China-based Longjong Consultancy.

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Viva, an Australian, said the Geolong refinery in Victoria would have to close permanently to reduce losses if coronavirus-led sanctions were not eased and demand did not rise. The Australian government has proposed spending billions of dollars to keep the country’s remaining four refineries open.

Singapore’s complex refining margins, Belvethor to Asia, were negative in the first half of September, turning slightly positive after four consecutive months of losses in August.

In the United States, the refining margin peaks at $ 9 a barrel in April. The difference between crude and fuel – Refiners usually do not make a profit on products unless it is more than $ 10.

Sources familiar to those plants said several refiners in the Philadelphia and Chicago area had stopped planned work to save money this fall. Overall, fewer refineries will be closed than usual for seasonal maintenance.

“Some refiners are in a difficult position because some people don’t have the cash to maintain it now, but they have no benefit from continuing,” said John Years, a refining analyst at Turner Mason & Company.

Taiwanese refiner Formosa Petrochemical spokeswoman KY Lin said Asian refiners had to deal with higher official selling prices from Saudi Arabia and other Middle Eastern manufacturers than late late spring, causing major refineries to reduce processing.

Japan, the world’s third-largest crude importer, cut its refinery consumption rate to 65.9 percent for the week to September 12, down from about 72 percent in mid-August.

South Korea’s largest refiner SK Innovation Co. Ltd. reduced crude processing at its two refineries to 80 percent in July-August after reducing it to 80 percent in September-October, a company spokesman said.

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“We’re back to a time when margins were poor,” Lynn said, adding that economics had actually declined since the second quarter. “Even though margins were poor then, raw feedstock costs were very low … now there is really no margin.”

Laura Sanicola in New York, Sonali Paul in Melbourne and Ahmed Ghadar in London; Additional reporting from Shu Zhang, Chen Aizu and Florence Tan in Singapore, Muyu Ju in Beijing, Heikang Yang in Seoul and Aaron Sheldrick in Tokyo; Editing by David Gaffen, Simon Webb and Marguerite Choi