Covid-19 may accelerate end of several refineries

According to Bloomberg, many oil operators and analysts expect a slow and uncertain recovery in fuel demand due to the current global picture. Therefore, many of the weaker plants are likely to be permanently closed. "Covid's situation accelerated the rationalization process that was on the way," said Spencer Welch, vice president of oil markets at IHS Markit. "This will hit Europe harder and first. But it will also hit North America, particularly the east coast."

The situation is a reflection of the coronavirus outbreak, which caused the consumption of transport fuels to collapse, bringing a major impact to the industry, which entered survival mode, cutting processing rates and even temporarily paralyzing refining in some cases. The measures have held up the sector's margins for a while, however, the combination of rising oil costs and still weak end-user demand begins to weigh. 

According to Fitch Ratings, while the global refining industry has been forced to cut capacity, the impact was likely greater in Europe and the U.S. than in Asia. In China, for example, refineries have recovered and have assistance from a government-established floor for product prices.

The combination of tightening in the oil market and weak demand should keep refining margins at historic lows in the coming months, research firm JBC Energy said in a report.


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