The global refining energy growth momentum has turned downward, and the supply shortage situation is difficult to change. First, in terms of inventory and operating rate, the global inventory of refined oil products has reached a historically low level, and the ability to increase the supply of oil products through destocking in the future is limited. The operating rate of overseas refineries has basically rebounded to a high level, and idle refining capacity is limited. Under the circumstance that the inventory of refined oil products is historically low, the overseas operating rate has rebounded to a high level, and the idle refining capacity is limited, the existing refining energy inventory is limited. Second, in terms of global refining energy trends, since the 1980s, the world’s newly added refining energy has mainly come from the Asia-Pacific region. The characteristics of refining energy growth and weakening continued to strengthen. Third, net exporters need to meet the refining gaps in other regions through trade methods such as shipping and pipelines. Once major factors such as geopolitical crises and poor transportation occur, the global refined oil market may face shortages. The outbreak of the Russian-Ukrainian conflict in February 2022 caused a major geopolitical crisis. According to our calculations, the supply gap of Russian refined oil products will be difficult to make up in the short term. According to IEA statistics, we expect that by the end of 2022, Russia’s effective refining capacity will be reduced by 117 million tons/year, and by 2023, Russia’s effective refining capacity will be reduced by another 70 million tons/year, a total decrease of 187 million tons/year compared to before the conflict . In 2022, the new overseas refining capacity will be superimposed on the maximum idle capacity that can be restored in Europe and the United States, a total of 120 million tons per year. Considering that it will take time for the new refining capacity to be put into production, and the EU sanctions against Russia will limit the supply of upstream raw materials to the refineries in the region, resulting in The operating rate of refineries is difficult to rise to a high level, and the possibility of maximum release of idle capacity in Europe and the United States is limited. We believe that it is difficult to offset the decline in refining capacity caused by the restricted export of Russian refined oil products in 2022.
United States: The policy is forcing transformation, and the incentive for refinery expansion is insufficient. The pandemic hit in 2020 has started a wave of shutdowns at U.S. refineries, which have fallen to the lowest level since 2014. At present, the operating rate of U.S. refineries has recovered to more than 90%, and the remaining idle capacity that can be restored is very limited. At the same time, under the incentives of the U.S. federal renewable diesel tax credit policy and the Renewable Fuel Standard (RFS) policy constraints, U.S. refiners are also accelerating their transition to renewable fuel businesses and investing in traditional refining projects. limited. In addition, although the current refining profit margin has increased significantly and the Biden administration’s low-carbon policy has loosened, according to the American Petroleum Institute (API) feedback, the long-term nature of the refining industry makes it difficult for American refiners to gain confidence in expanding production. At the same time, low-carbon Fuel has become a consensus for the future development of the North American refining industry.
Europe: The decline in refining capacity is difficult to change, and the determination of suppliers to transform has been determined. Outdated equipment + the impact of the epidemic + severe carbon emission reduction policies are important factors that inhibit European production capacity: First, most refineries in Europe were built early, and the equipment has not been upgraded and upgraded, resulting in limited refining competitiveness. The impact of the epidemic in 2020-2021 will make Europe Low or even negative refining margins are also an important reason for accelerating the withdrawal of European refinery capacity. Second, under the guidance of Europe’s increasingly stringent policies to address climate change, the high cost of carbon emissions has put enormous pressure on European oil and gas companies to transform. So far, a number of European oil companies have successively announced the strategic goal of net zero emissions and reduced investment in traditional fossil energy, which means that the future growth of oil refining capacity in Europe is limited.
Asia, Africa and Latin America: The main source of growth for global refining energy. During the 14th Five-Year Plan period, we expect that China will add more than 100 million tons of refining capacity per year. However, due to the low yield of refined oil in China’s new refineries and the strict export quota policy for refined oil, China’s new refining capacity will affect the global refining energy supply and demand. The layout has limited impact. The Japanese government is pessimistic about the outlook for refining, urging continued reductions in Japanese refinery capacity. The pace of refinery construction in emerging countries or regions such as Southeast Asia, India, the Middle East, and Africa has accelerated. According to our statistical analysis, we estimate that the annual net new production capacity in Asia, Africa and Latin America (excluding China) from 2022 to 2025 will be 27,000,000, 8,154, 4,98 and 78,490,000 tons per year, totaling 192 million tons per year, and there are also 196 million tons/year is planned or the production time is uncertain.
The supply and demand gap of overseas refining energy may exist for a long time, and the oil price difference of overseas refined products is expected to remain high. In the medium and long term, according to our estimates of overseas refining energy supply and demand, we believe that the transformation of refineries in Europe and the United States will accelerate in the future, and new refinery capacity will be put into operation in Asia, Africa and Latin America. In the process, overseas crude oil demand will continue to grow. Even without considering the sanctions imposed by Europe and the United States on Russia, there will still be a gap in overseas refining supply and demand itself. Moreover, whether Europe and the United States maintain the existing sanctions on Russia or increase the implementation of sanctions in the future, the decline in Russia’s refined oil exports will force its effective refining capacity to decline, and the gap between overseas refining supply and demand will further expand, which is also expected to support overseas refined oil prices. Poor long-cycle high-level operation.
The production capacity cycle has triggered great energy inflation, and we are optimistic about the historic allocation opportunities for crude oil and refineries. Cost side: Capital expenditure is the main reason for limiting crude oil production. Considering the lack of long-term capital expenditure on global crude oil, the elasticity of global crude oil supply will decline, and in the transition between new and old energy sources, crude oil demand is still growing, the world will continue to face the problem of crude oil shortage for many years, and the crude oil production cycle will keep oil prices high for a long time. Demand side: Crude oil needs to be processed by refineries to show its use value. The increase in crude oil demand in the future also means an increase in refining and processing demand. According to the July 2022 reports of the three major institutions and our forecast using the “crude oil demand/GDP elasticity coefficient”, the growth rate of overseas and global demand will slow down from 2022 to 2025, but it will still maintain a growth trend. In 2022, Europe and the United States will be the main force for the growth of global crude oil demand. In 2023, China’s demand will usher in a wave of rebound, and Asia, represented by China and India, will lead the growth of global crude oil demand. Supply side: There is a cyclical decline in global refining capacity.
The new crown epidemic has accelerated the elimination of refineries in Europe and the United States. In the process of government policies and the transformation of old and new energy sources, the future growth engine of European and American refiners will be in the field of renewable fuels. Although the current refining profit margin has increased significantly, the investment return period of oil refineries is long. , the greater uncertainty during the period prompted U.S. refiners to lose confidence in expanding production. However, overseas regions such as Southeast Asia, the Middle East, and India have limited new refining capacity, making it difficult to meet the future increase in global refining demand. We believe that the long-term shortage of upstream capital expenditure in oil fields supports the high price of crude oil, the gap between supply and demand of overseas refining drives the high oil price gap of refined products, and the cycle of crude oil and refinery production capacity promotes both the cost side and the profit side of refining, and the high price of refined oil may continue. For a long period of time, it directly triggered the great inflation.
The global oil refining supply and demand pattern is highly sensitive to external factors. There are four important risk variables to pay attention to: 1) The market is worried that the Fed and central banks in many countries may raise interest rates and may trigger an economic recession. According to our estimates, the global GDP growth rate is – In the case of 1%, overseas and the world may face the problem of oversupply. 2) Changes in Russian sanctions. We believe that the possible decline in Russia’s refined oil exports in 2022-2023 is very important. If sanctions against Russia are lifted, the supply and demand gap of overseas refining may disappear, and the world will face the risk of oversupply. 3) China’s refined oil export quota policy, China’s refining supply and demand is in excess, if China liberalizes refining production and relaxes refined oil export restrictions, China’s currently available idle refining capacity and future new refining capacity will complement overseas markets. Without considering the sanctions imposed by Europe and the United States on Russia or maintaining the existing sanctions against Russia, there is a surplus of global refining capacity. Only when Europe and the United States step up the enforcement of sanctions against Russia, can the global refining supply and demand reach a balance. Therefore, China’s policies on refining production and export quotas for refined products are crucial. 4) Refining project commissioning schedule: The commissioning schedule of new refining projects may significantly affect the overseas and global supply and demand patterns. On the one hand, some of the global refinery projects under construction that we have compiled have not yet specified the start-up time, and we have not taken them into account when estimating the global refining supply and demand. Once these projects are put into operation, they may exacerbate the risk of global refining surplus. On the other hand, countries in Asia, Africa and Latin America may face supply chain shortages and financial constraints, leading to the delay of some projects in production, which will also lead to the expansion of overseas refining gaps.
To view the full report click here
Note: Unless it is marked as original, it is all submitted by netizens or institutions for sharing. If you need to publish, please contact [email protected].
This article is reprinted from: https://www.dx2025.com/archives/173517.html
This site is for inclusion only, and the copyright belongs to the original author.