The drop in indicative crude oil refining margins in October to their lowest level since 2014 has been halted by falling Brent crude prices, the International Energy Agency said in its monthly report.
Despite the "precipitous" drop overall, some sour margins had increased due to wider differentials, including simple margins in Europe and Singapore, boosted by lower refinery runs and narrowing fuel oil discounts, as well as US Midwest margins that had been boosted by lower utilization rates in PADD 2, the report said.
Overall, the drop in October was driven both by higher crude prices and a build-up of stocks.
For the first time in three years, refiners' Q3 throughput was sufficient to cover seasonally rising demand but also to build stocks, resulting "in the highest refined product stock builds" since Q3 2014.
With runs set to increase 2.7 million b/d from October to December and demand seasonally declining "product inventories are expected to continue building", the report said.
Run cuts could be lowered if complex margins fall again and "remain at barely positive levels" for the rest of the quarter. However, lower crude prices may prevent a further drop in refining margins, the IEA said.
The agency has retained its 2019 runs forecast at 1.2 million b/d growth, which would result in 0.5 million b/d refined products stock build.
Next year could see pressure from the "continued weakness" in the light distillates complex and the ability of incremental US shale barrels to find home, the IEA said.
Meanwhile in October, light distillates such as gasoline and naphtha "suffered especially badly" on lackluster demand, according to the report.
"Our estimate for global gasoline demand growth this year is a puny 80,000 b/d, the lowest annual level since 2011," the IEA said.
