Oil Refineries
Price Resurgence Over the Summer Season
August 2019
Global refining throughput in 2019Q2 dropped 0.7Mbpd year-on-year while June accounted for a 0.9Mbpd year-on-year decline. The downstream sector has seen general activity decline, with the exception of China and the Middle East.

China's refineries increased crude throughput to around 13.07Mbpd or in June, which represents a 7.7% year-on-year according to China’s National Bureau of Statistics (NBS). 

This jump has been attributed to the start-up of two new independent refineries, Hengli Petrochemical and Zhejiang Petrochemical, each with 400kbpd processing capacity. However, the next months will not not likely experience any new records due to extended shutdowns amid high diesel and gasoline inventories and weak domestic fuel demand.

Over the 2019-20 period, the refining business will transition towards complexity of downstream units due to the International Maritime Organisation (IMO) regulation which require an upgrade in product quality (0.5% maximum sulphur content). The 180kbpd-Zeeland refinery is one of many European plants that are expanding hydrocracking units to boost production of low sulphur diesel.

AME expects significant demand growth for refined products to come from India, China and Brazil through 2020—as opposed to the anticipated further decline in demand from Japan. Jet fuel and petrochemical feedstocks will drive increased demand in China.

In the US, refining throughput climbed 0.5Mbpd m-o-m in June. The overall ramp-up in refinery runs was affected by a fire and the subsequent closure of the 335kbpd Philadelphia refinery, in the second half of June. Phillips 66 plans to run the 11 refineries it operates in the mid-90% range of their combined 2.17Mbpd capacity in the third quarter. These refineries are already in the transition towards low-sulphur marine fuels since January and gasoline outputs are expected to be affected as vacuum gasoil, a gasoline feedstock, may be blended with fuel oil to meet IMO 2020 regulations.

AME's 5-3-2 crack spread vs Brent averaged US$15.89/bbl in July, 17.8% higher than the US$13.06/bbl in June, driven by increased demand for motor fuels during the summer months. RBOB gasoline prices continue their resurgence over the quarter, with prices reaching US$79.95/bbl in July from US$77.75/bbl in June, but way off from April average price of US$105.3/bbl. Similarly, US Diesel prices slightly recovered to US$78.5/bbl from US$75.9/bbl in June, with the highest of the year observed at US$84.5/bbl in April.