Biden To Meet U.S. Oil Refiners On Mitigating Soaring Oil Prices
June 23, 2022
May 19, 2021
Whether it’s more traffic on the roads, brighter economic readings, or persistently strong freight activity, Europe’s battered oil refineries are finally looking at some relief from Covid-19 and the devastation it wrought on petroleum demand.
A measure for the profit plants make from turning crude oil into diesel has doubled since late March, a bullish signal that’s all the more important in Europe because the continent’s refiners churn out twice as much diesel as they do gasoline. Oil traders report that the region’s crude oil demand is also picking up again.
The agency sees the continent’s total oil demand rising by more than 9% this quarter and almost 4% in the next. Several European crude traders said demand for physical cargoes from the region has strengthened in the past few weeks.
Europe’s plants would be doing even better if yields were more weighted toward gasoline -- as they are in the U.S. -- because profits from making the fuel are around $10 per barrel, partly thanks to the strong recovery in consumption on the other side of the Atlantic, a key export market for Europe.
There are even signs of a tentative improvement in the jet fuel market. The continent’s refiners originally slashed the amount they produce from every barrel of crude in response to the pandemic. Those yields are now starting to recover. At Europe’s plants, the yield of jet, and, kerosene -- used to make aviation fuel, and for heating in some parts of the world -- hit a ten-month high in February, and is likely to rise.
“May, June, July, I would expect an improvement,” said Hedi Grati, a director at IHS Markit. “But I don’t expect them to get anywhere near the 9%” that was seen in January 2020, he added. The continent’s flight numbers are still only about 38% of pre-pandemic levels, according to data from Eurocontrol, though air travel is starting to open up.
Despite the improving picture, Europe’s refining industry still faces significant headwinds.
Since the pandemic began, there have been announcements of plant closures in France, Belgium, Finland and Portugal and of capacity reductions in the Netherlands and U.K. More will almost certainly follow, with new refineries coming online in Asia set to flood the continent with cheap fuel, potentially eroding profits for local plants.
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