Wood Mackenzie says gasoline surplus after 2017 likely to reverse refinery fortunes
A surplus of gasoline supply globally as early as 2017 is likely to put "significant pressure on refiners by the end of the decade," and bring an end to the current healthy margins, according to energy consultancy Wood Mackenzie's latest long-term oil product market forecast.
By 2019, gasoline cracks and margins could weaken to levels seen in 2013 and 2014.
"Although gasoline cracks have been very strong this year, we could see a complete reversal in the market in just two years," Jonathan Leitch, a research director for oil product markets research, said in a statement.
As a result of the low crude costs, unexpected outages and "slower than expected ramp-up of new facilities in the Middle East," refineries had been enjoying healthy margins recently.
"The outlook for 2016 remains similar and in many ways stable, but in 2020 we start to see a glut of gasoline supply developing -- in excess of 30 million tons - which doesn't go away for a decade," Leitch added.
The ramp-up of three new refineries in the Middle East, which will add a total of 1.2 million b/d in capacity, coupled with stabilization of operations in Venezuela and ongoing investments can lead to prolonged period of oversupply, Wood Mac added.
According to Wood Mac's analysis, which tracks 745 operational refineries globally, gasoline yields are expected to increase by 1% over the next 15 year.
But while at present refiners are struggling to meet the gasoline demand growth of around 420,000 b/d, demand growth will slow down due to increased efficiency and alternative fuel sources.
By 2019, margins could bottom out "at minimum sustainable levels for Europe and Asia," Leitch said.
As a result, Leitch expects further capacity consolidation in Europe and Asia, and challenges for the US refining sector "particularly in areas without access to export markets."
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- August 24, 2015
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