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Global refineries slow down production as demand for fuel dips

Refining operations in Europe and elsewhere in the world are being curtailed as gasoline and jet fuel demand is falling off a cliff due to the enormous demand destruction in the spreading coronavirus pandemic.

In Europe, oil majors are shutting down refinery units as major economies are under lockdown and flights are severely restricted, Reuters reported, quoting sources and industry data provider Genscape.

“Horrendous margins and even worse physical markets,” a source familiar with the operations of INEOS’s refinery in Grangemouth in the UK told Reuters.

Nigeria depends heavily on importation of refined fuel as local refineries lack the capacity to meet the daily demand for premium motor spirit.

Nigeria’s three refineries in Port Harcourt, Warri and Kaduna, managed by the Nigerian National Petroleum Corporation (NNPC), continued their losing streak last December, hurting the nation’s economy by about N150 million.

The NNPC’s Monthly Financial and Operations Report (MFOR) showed that the corporation increased its trade surplus to N5.28 billion during its December 2019 operations compared to the N3.95 billion posted for the preceding month.

A further breakdown indicates that Kaduna Refining and Petrochemical Company Limited recorded the highest loss of N59 million, Port Harcourt Refining Company (PHRC) posted N44.7 million while Warri Refinery capped the losses with N45.4 million.

Earlier last week, INEOS shut down the 35,000 barrels per day crude unit at the refinery, according to Genscape data cited by Reuters.

BP, for its part, is said to have shut the 70,000-bpd crude processing unit at its refinery in Gelsenkirchen in Germany. In France, Total is delaying the restart of a 102,000 bpd refinery close to Paris after planned maintenance, Thierry Defresne, a delegate for the CGT union, told Reuters.

Across Europe, lockdowns in Italy, Spain, and France are crushing oil demand and German traffic is down 40 percent, Giovanni Serio, head of research at the world’s largest independent oil trader Vitol, told Reuters on Friday. If the UK takes more measures to curb domestic travel, around 40 percent of Europe’s 7-million-bpd demand is at risk, Serio told Reuters.

Global oil demand is set to plunge by more than 10 percent from the typical 100-million-bpd consumption, as the raging coronavirus pandemic forces countries into lockdown, the executive said.

Falling demand, including jet fuel demand, may force Japanese refiners to cut run rates, Takashi Tsukioka, president of the Petroleum Association of Japan (PAJ), said on Thursday. Japanese refiners are stocked with crude for April and don’t have much room to take extra barrels from Saudi Arabia, regardless of how cheap the flood of additional supply will be, Tsukioka told a news conference, as quoted by Reuters.

The global oil storage infrastructure is in trouble and will be unable to take more crude and products in just a few months, according to a latest analysis by Oslo-based research and consultancy firm Rystad Energy.

It said the largest oil supply surplus the world has ever seen in a single quarter is about to hit the global market from April, creating an imbalance of around 10 million barrels per day (bpd).

The current liquid balances show supply surpassing oil demand by an average of nearly 6 million bpd in 2020, resulting in an accumulated implied storage build of 2.0 billion barrels this year.

“We find that the world currently has around 7.2 billion barrels crude and products in storage, including 1.3 billion to 1.4 billion barrels currently onboard oil tankers at sea. We estimate that, on average, 76 per cent of the world’s oil storage capacity is already full,” the firm said.

Source: The Guardian