European Oil Refiners Lag World on Slow Covid-19 Demand Recovery
(Bloomberg) -- To understand the European oil market and its recovery from Covid 19, a good place to look is at the continent’s refineries.
The region’s plants churn out millions of barrels of fuels like diesel and gasoline each day to meet demand from motorists and the wider industrial sector. Right now, though, their processing levels are lagging well behind those of rivals in Asia and North America, a reflection of consumption that’s still being hit hard by the pandemic.
The continent’s refinery throughputs will be 15%-20% lower this quarter than they were in the pre-pandemic world of 2019, a bigger deficit than both North America and Asia, according to Wood Mackenzie Ltd.
“Extended lockdown in Europe has seen transport demand take a huge hit,” said Mark Williams, an analyst at the industry consultant. It’s not only weak fuel consumption that’s curbing processing: other factors, including high stockpiles and imports of diesel-type fuel, are also hurting, he said.
Europe’s comparatively low refining runs are also visible in data from consultancy Energy Aspects. The continent’s crude processing is expected to be down by 15% this quarter versus 2019, according to a Bloomberg calculation using recent figures from the firm. That’s a bigger lag in percentage terms than any other major refining region in the world.
Asia’s oil refineries enjoyed a strong economic recovery in the second half of last year, Williams said. And while refining rates in the U.S. this quarter have been dented by bad weather, underlying demand has still not suffered as much as in Europe, where lockdowns have suffocated fuel consumption, he added.
In the second quarter, Europe should play catch up. It’s processing rates should gain by about 10 percentage points in that period, while those in North America and Asia will rise by 5 percentage points, according to Wood Mackenzie’s estimates.
The current weakness in Europe has been apparent in crude demand. For example, Nigerian barrels that would often flow toward Europe in normal times have been slower to clear because of the continent’s relatively sluggish consumption and subdued buying interest from elsewhere, according to traders of West African oil.
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