Global oil refiners shut down as coronavirus destroys demand
28 March, 2020, 6:01 pm
SINGAPORE/NEW DELHI/SEOUL/LONDON (Reuters) – The first oil refinery shutdowns in India and Europe were announced on Friday while global refinery runs drop like a stone in response to plunging demand as countries worldwide implement lockdowns.
Italy’s API said it would close operations temporarily at its Ancona refinery, which has capacity of 85,000 barrels per day (bpd). In India, top refiners Indian Oil Corp (IOC.NS) and Mangalore Refinery and Petrochemicals (MRPL.NS) declared force majeure, with MRPL in the process of shutting down its entire plant.
Global fuel demand is set to drop by as much as 15% to 20% in the second quarter after the coronavirus pandemic, which has killed more than 22,000 people, halted most worldwide air travel and prompted the national lockdowns to keep people at home.
The resulting slump in demand for oil products, along with Saudi Arabia and Russia’s decisions to increase crude output after last month’s collapse of OPEC’s oil supply pact, is expected to overwhelm refiners as storage capacity dwindles.
A source with knowledge of the matter said that Spain’s Repsol would cut runs by about 10% at its complex refineries.
In Asia, home to more than a third of global refining capacity, India’s top refiner IOC said in a letter to crude suppliers that it had reduced runs by up to 40% and closed its Panipat naphtha cracker plant because of sliding petrochemicals demand.
Meanwhile, operators in Japan, South Korea and Thailand – already running at reduced rates – are looking at more cuts even as they shut plants for maintenance.
India’s Reliance Industries (RELI.NS), operator of the world’s largest refining complex, has made a rare move to sell prompt crude as it plans to cut output in April.
Several U.S. refineries have also cut production, including plants in the Los Angeles area, a busy hub for air travel, and Exxon’s (XOM.N) Baytown facility in Texas.
The Baytown plant, Exxon’s largest in the United States, is shutting a gasoline-making unit as U.S. fuel demand tumbles.
Overall products supplied in the United States fell by 2.1 million bpd in the most recent week, representing close to a 10% drop, while IHS Markit estimates that gasoline demand in the world’s biggest oil consumer could drop by nearly half in the coming weeks.
In Europe, some refineries in Britain and Germany have scaled back production, with traders expecting many others to follow as demand falters. ExxonMobil’s French subsidiary on Friday said it would adapt production to falling demand.
Independent refiner Phillips 66 (PSX.N) said its first-quarter refinery utilisation rate was in the low-to-mid-80s range, with many refineries operating near minimum rates.
China is an outlier, having restarted its economy after weeks of lockdown, with its refining sector showing signs of recovery after a decline in the number of new virus cases.