As oil and gas continues its slow recovery due to lacklustre demand for gasoline and other refined products, the refining industry is bracing for what could be a volatile outlook in the near future.
“We expect global refinery utilisation to recover only modesty from the Covid-19 [coronavirus] blows of 2020,”said Alan Gelder, vice president of Refining for Wood Mackenzie, in Reuter’s Downstream Leadership Forum.
Globally, refined products consumption fell by almost 30% in Q1 and is projected to be 91.9m bbl/day in 2020, down 8% year on year, according to a recent Deloitte study.
Lower prices have led to lower refinery utilisation and shifting yields, translating into lower downstream revenues and margins, bringing refinery utilisation back to the 1980s.
The 1980s were a period of extensive refinery rationalisation as oil demand collapsed from high prices in the previous decade.
Oil and gas demand has been hit hard as a result of the lockdowns from the coronavirus pandemic, and the simultaneous production increases and price cuts by the Organization of the Petroleum Exporting Countries (OPEC).
Demand for jet fuel has also remained anaemic, with US demand still half of its pre-coronavirus levels as many people defer air travel.
Inventories are also not expected to fall back to normal levels until well into 2021.
