Global surplus refining capacity is expected to rise by more 1 million b/d to 5.3 million b/d in 2021 creating "significant pressure" on refining margins in the medium term, the International Energy Agency said Monday.
In addition to nearly 8 million b/d of new global refining capacity due to come on stream over the next five years, growing volumes of non-refining fuels mean the gap between capacity expansions and demand will rise to about 2 million b/d, according to the IEA's latest medium-term report.
Global crude distillation capacity is expected to rise by 7.7 million b/d from 2016 to 105 million b/d in 2021, the IEA said.
Regionally, nearly two-thirds of global spare capacity will be found in non-OECD countries, where many refineries are under-utilized for various reasons, the IEA said.
It cautioned, however, that the oil price downturn has raised the likelihood of delays for many new refining projects as oil companies seek to conserve their dwindling cash flows.
Annual capacity additions are estimated to average 1.3 million b/d through 2021, despite some 1.7 million b/d of projects deferred beyond 2021, the IEA said.
The IEA said it sees low capacity additions this year -- about half of the expected annual demand growth -- potentially tightening the oil product market. But a massive overhang of oil product stocks means a resulting margin boost "may not materialise".
The IEA estimates that almost one-sixth of global oil demand will be met by fuels by-passing the refining sector such as biofuels and NGL's in 2021, which will exacerbate the surplus capacity issue.
Global biofuels production is estimated to rise to 2.7 million b/d in 2021, up from 2.3 million b/d in 2015.
