Permanent oil refinery closures accelerate as pandemic bites
Permanent refining capacity closures expected for 2020-2021 have risen to about 1.7 MMbpd as the COVID-19 pandemic hammers demand for oil products, the International Energy Agency said.
About a dozen refinery closures have been announced in the past few months, the IEA said, with the bulk of capacity closures - over 1 MMbpd - happening in the United States.
“There were capacity shutdowns planned for 2020-2021 prior to COVID-19, but the bulk of the new announcements reflect pessimism about refining economics in a world suffering from temporary demand collapse and structural refining overcapacity,” the IEA said in its monthly report.
In 2019, global crude refining capacity stood at 102 MMbpd, catering for 84 million bpd of refined oil products demand. That shrank to 76 MMbpd in 2020 and is expected to be 80 million bpd in 2021, the IEA said.
This week, Royal Dutch Shell said it will halve crude processing capacity and cut jobs at its 500,000 bpd Pulau Bukom oil refinery in Singapore.
In Europe, Petroineos plans to mothball nearly half of its 200,000 bpd refinery at Grangemouth in Scotland, and Gunvor will shutter its 110,000 bpd Antwerp oil refinery in Belgium.
The outlook for refining remains mixed, with traditionally low-value naphtha and fuel oil possible bright spots in the new year, Vitol chief executive Russell Hardy told the Reuters Commodity Trading Summit this week .
He said the 1.6-1.7 MMbpd of capacity closures already announced to take place by the end of 2021 to early 2022 could grow by a further 1 MMbpd.
Plateauing fuel demand, tightening environmental rules and overseas competition have prompted several European and U.S. refiners to opt for converting plants to produce biofuels.
Reporting by Ahmad Ghaddar; Editing by Jan Harvey
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