Refiners across the global are bracing to reduce output further as demand dwindles amid lockdowns and travel restrictions to combat the coronavirus pandemic. Major refineries in India have reportedly slashed production by 25%-30%. Meanwhile, crude processors in Japan, South Korea, and Thailand are looking to deepen their output reduction, although they have shut plants for maintenance.
Some British and German refiners have cut output, with other refiners expected to follow suit soon. US refiners also suffered from the same fate. Phillips 66 said its refinery utilization rate fell to the low-to-mid-80s range in the first quarter. Many other refiners also operate at reduced rates.
Goldman Sachs analysts estimated global oil demand to have fallen by 10.5 million bpd in March. The consumption is expected to plunge further by 18.7 million bpd in April. Goldman Sachs estimates global annual oil demand this year will be 4.25 million bpd lower than last year.
Asian refiners are losing money every time they process a barrel of crude as domestic demand falters while exports are not lucrative. A Singaporean refiner loses more than $6 for every barrel of gasoline production.
Data from the Korea National Oil Corp showed run rates fell to 82.8% in February and were expected to fall further in the following months. Demand for gasoline and diesel is estimated to have declined by about 30% this month. Hyundai Oilbank said it would slash expenses by 70% to offset the squeezed margins. In Japan, run rates decreased by almost 7% for the first 12 weeks of this year. JXTG, Japan’s largest refiner, said it might record a net loss of ¥300 billion ($2.7 billion) for a 12-month period ending this month.
Conversely, China’s refining sector is showing some signs of improvement as the number of coronavirus cases declines. Run rates in this country are expected to rise 3% year-on-year in the second quarter, after falling to 63% in February.
