Margins push global refinery turnabouts 40% lower
The biggest outages will be in Asia but there are stark regional differences
Global refinery turnarounds (TARs) will be almost 40% lower in October compared with a year earlier, as refiners continue to take advantage of cheap crude and healthy margins.
This year, TARs-when facilities are taken off line for scheduled maintenance-are expected to peak in October at 5.4m barrels a day, according to Energy Aspects. This is 3.27m b/d lower than in October last year, a drop of 37.7%.
The largest scheduled maintenance periods are expected to be in Asia, with around 1.92m b/d of capacity being shut that month-462,000 b/d less than in October 2015.
Seasonal maintenance periods usually tighten global petroleum supply as there is less available distillation capacity to pump out products. The result is that a lighter maintenance schedule won't do much to balance the products market. On the other hand, more distillation capacity means more crude is refined. So less maintenance this October should see more oil consumed than in October 2015.
The second largest outages in October will occur in North America, where around 1.66m b/d of capacity will be taken off. This is around 411,000 b/d below levels a year earlier.
In Europe turnarounds will also fall from last year's levels, dropping by 244,000 b/d to 0.65m b/d.
Global outages of crude distillation units at refineries are expected to be around 33% lower than at the same time last year, at around 4.95m b/d in October, according to Energy Aspects. In the same period last year, outages stood at 7.39m b/d.
The fall in turnaround levels is because profits for processing crude into refined products have remained healthy, especially in the US, despite stocks being high.
WTI cracking margins in the US Midcontinent gained over $4/b in August, according to the International Energy Agency, averaging $14.26/b. In May, margins were $12.95/b.
Profits for processing crude in products also gained in the US Gulf Coast, Mediterranean and northwest Europe.
But the refining rally won't last.
Cracking margins will tumble in every region in Q4 as persistently high stocks and slowing oil-demand growth weigh on profits. Brent cracking margins will average just $0.50/b in Q4, down from a high of $5.50/b ion Q2 last year, reckons Energy Aspects. Hydroskimming margins-for less complex refineries-in Europe have been negative since the start of last year and are expected to remain so until end-2017.