Sluggish jet demand to cap European crude refinery runs

A recovery in European jet fuel demand to pre-pandemic levels is years away, forcing regional refiners to continue blending the aviation fuel into diesel, and keeping a lid on their crude runs, consultancy FGE Energy said.

FGE sees jet/kerosene demand in Europe at the end of 2022 reaching 75% of 2018-2019 levels only, meaning European refiners will continue to blend a large volume of jet into diesel to soak up the surplus.

"Such blending tends to limit overall refinery crude throughput because maximum distillate hydrotreating capacity is reached at lower crude throughputs," FGE says.

Hydrotreating is a chemical process used in refining petroleum products to remove sulfur.

"At this point, incremental crude runs would produce only naphtha, high sulphur gasoil and fuel oil – not a recipe for positive margins," FGE added.

The consultancy forecasts European jet demand not fully returning to pre-COVID-19 levels until 2030, but it will be very close to it from 2024-25 onwards.

The collapse in fuel demand after major European economies went into lockdown to slow the spread of the coronavirus forced refineries that could no longer profitably run into capacity rationalisation.

FGE estimates that European refining capacity will shrink by 700,000 barrels per day (bpd) due to the closures announced for 2020 and 2021, with hydrotreating capacity falling by 200,000 bpd.

This means European refiners will not return to their pre-COVID-19 annual crude run levels of 12.5 million bpd, FGE says, and forecasting runs to average 11.1 million bpd this year and 11.7 million bpd next year.

"The more jet that can be pulled out of the diesel pool (thus freeing-up diesel hydrotreating capacity) the more scope there is for refiners to increase throughput," FGE said.

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