By JENNY GROSS
LONDON -- Millions of barrels of new crude-oil refining capacity will come online this year and next, a growth that will likely lead to supply outpacing demand and smaller profit margins for refiners around the world, the International Energy Agency said in its monthly oil market report on Thursday.
More than 1 million bpd of new refining capacity is likely to come online this year, and a further 1.3 million bpd in 2013, compared with just 400,000 bpd in 2011.
The significant addition to capacity - much of which is in Asia - will grossly outpace demand growth for oil products, which the IEA estimates will average 800,000 bpd this year and 1 million bpd day in 2013.
The increase in capacity could mean more refinery closures globally, but particularly in Europe where eight refiners have shut since the start of the economic crisis in 2008.
The Continent's sovereign-debt problems have cut into demand for fuel such as gasoline and diesel.
"It is clear the pressures are on mature markets," said Toril Bosoni, a senior IEA oil market analyst. "Pressure will be on profitability and we could see more closures than what have been announced so far."
Of the mature markets, the US is the exception, Ms. Bosoni said. Refineries there have shown surprising strength recently and will likely continue to do so as access to cheaper Bakken Shale crude gives refiners a strategic advantage.
"US refiners are clearly outperforming others in Europe and Singapore and other refining centers," Ms. Bosoni said. "As long as the US domestically produces crude cheaper, it does give US refineries an advantage over other areas."
The IEA said it expects global refinery runs in the third quarter to rise to 75.8 million bpd, 500,000 bpd higher than the previous-year quarter as key oil-consuming countries restock products.
Aside from robust runs from US refineries, a boost in refinery runs in the Middle East and Russia have also contributed to the rise.
In the US, Delta Air Lines plans to restart fuel production from the idled ConocoPhillips Trainer refinery, and Carlyle Group has agreed to take over operations of Sunocos 330,000 bpd Philadelphia refinery.
This will provide further relief to the US East Coast downstream industry.
The US success story comes at a cost to the industry in other regions. Since demand for fuel in the US is contracting overall, it is exporting more product to Latin America and Europe, leaving refineries in these regions with less market share.
Dow Jones Newswires