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European refineries suffer from under-investment

  • Spanish Market: Crude oil, LPG, Oil products
  • 05/01/24

European refiners are shutting capacity again, but tight diesel supply could give them a last hurrah, writes Benedict George

Falling demand for fuels has been dissuading many European refiners from investing in their plants, with the result that assets are deteriorating and some closing altogether. But extraordinary margins are still achievable in the short term for those that can stay on line.

Argus reported 14 separate incidents in which a European refining unit had to close because of a fire, leak, power outage or other accident in 2023 — up from 12 in 2022. Under-investment has been exacerbated by circumstances. European costs are uncompetitive against those in the Middle East or Asia. European oil demand is declining, but growing in those other regions. Ageing units have been undermaintained since 2020 because of the pandemic and then a reluctance to miss out on resurgent margins by halting units for upkeep. A prolonged heatwave last summer added further mechanical stress. The EU ban on Russian crude has pushed some units to run lighter slates than they were designed for.

The inevitable result of long-term under-investment and underperformance is permanent closure. This trend has been evident for decades and came to the fore again late last year, after extraordinary margins for most of 2022 and 2023 led to a pause. UK-Chinese joint venture Petroineos announced in November that it is beginning the process of converting the 150,000 b/d Grangemouth refinery in Scotland into an import terminal — work it expects to complete in 2025.

"Refinery margins are forecast to normalise over the medium term, resulting in a reversion to loss-making for our business," Petroineos told Argus. Six European refineries have closed since 2020. Grangemouth will bring that to seven and Shell's 147,000 b/d Wesseling refinery in western Germany will make it eight if they both close in 2025. These closures will bring a 935,000 b/d capacity loss.

Italian refineries look most vulnerable. Eni told workers as long ago as 2021 that its 84,000 b/d Livorno facility would stop refining crude by 2022, to focus on base oils and biofuels. This has not happened yet, perhaps because conventional refining margins have been so high. Oil traders said the Eni-KPC 241,000 b/d Milazzo refinery in Sicily is comparatively unprofitable too.

Major retreat

The majors also keep edging away from European refining through divestments. TotalEnergies, Shell and ExxonMobil have exited eight European refining assets between them since 2020. Most recently, ExxonMobil sold its 25pc stake in southern Germany's Miro refinery in October 2023, and Shell its 37.5pc stake in Germany's Schwedt to UK-based Prax.

In the shorter term, European refiners are likely to keep reaping profits that are extraordinary by historical standards. Falling regional capacity and frequent outages are buoying the margins of those that manage to stay on line. Without political rapprochement with Russia, diesel supply lines will remain long and unreliable, keeping margins high in Europe. The forecast recovery of European economic growth in 2024 could add demand and push margins still higher.

TotalEnergies chief executive Patrick Pouyanne noted that the firm's refineries are already "running to make diesel" because the loss of Russian supply has kept diesel margins elevated despite weak demand. If production cannot rise to match a demand recovery, margins respond more strongly.

But if planned refining capacity opens in other regions, European plants might face stiffer competition. Oman's 230,000 b/d Duqm and Nigeria's 650,000 b/d Dangote refinery could start up fully in 2024, while Kuwait's 615,000 b/d al-Zour refinery could begin shipping diesel west too. But the only seemingly reliable thing about new refinery start-ups is that they do not happen on schedule.


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13/02/25

Better Opec+ compliance narrowing supply surplus: IEA

Better Opec+ compliance narrowing supply surplus: IEA

London, 13 February (Argus) — The IEA said today that the Opec+ alliance's improving compliance with agreed crude production targets is "slowly chipping away" at its projected supply surplus this year. In its latest Oil Market Report (OMR), the Paris-based agency again lowered its forecasted surplus for this year, this time by 270,000 b/d to 450,000 b/d. This is the agency's third consecutive downgrade since November, when it saw 2025 supply outstripping demand by 1.15mn b/d. These forecasts are subject to change. With data now "largely complete" for 2024, the agency's balances show supply matching and demand exactly at 102.9mn b/d. This is a long way off the 800,000 b/d supply surplus the IEA forecast for 2024 this time last year. Opec+ is implementing three sets of crude production cuts, and is scheduled to start unwinding one of these — totalling 2.2mn b/d — starting in April. A recent meeting of the group's key producers signalled no change to this plan . The IEA continues to assume all Opec+ cuts will remain in place this year. But the agency said that should production return as planned, this would add 430,000 b/d to its 2025 supply forecast. Aside from Opec+, there are other key supply uncertainties this year. These range from new US sanctions targeting Russian and Iranian oil exports to US tariffs on some of its key trading partners. "It is still too early to tell how trade flows will respond to new US tariffs or the prospect thereof, and what the impact of the escalation of sanctions on Iran and Russia may be in the longer run," the IEA said. As thing stand, the IEA sees global oil supply growing by 1.56mn b/d this year to 104.45mn b/d, compared with growth of 1.76mn b/d projected in its January report. This slower growth was largely driven by Opec+, which the agency now sees supplying 170,000 b/d less than previously thought this year. It also noted a 950,000 b/d fall in global oil supply in January, "with extreme cold weather hitting North American supply, compounding large declines in Nigerian and Libyan production." On demand, the agency upgraded its growth forecast this year by 50,000 b/d to 1.1mn b/d. It sees oil demand at 104mn b/d in 2025, driven by "a minor pickup in GDP growth and lower oil prices as per the current forward curve." The IEA said global observed oil stocks fell by 17.1mn bl in December. Crude stocks fell by 63.5mn bl and products stocks rose by 46.4mn bl. It said preliminary data show global stocks falling by 49.3mn bl in January, led by large draw in China. By Aydin Calik Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Mexico factory output dips 1.4pc in December


12/02/25
12/02/25

Mexico factory output dips 1.4pc in December

Mexico City, 12 February (Argus) — Mexico's industrial production fell 1.4pc in December from the previous month with broad weakness across multiple sectors on tariff uncertainty and weak domestic demand. The result marks the largest monthly decline of 2024 and was weaker than the 1pc decline forecast by Mexican bank Banorte. It followed a nearly flat reading in November. Trade uncertainty and low domestic demand weighed on industrial production in December, said Banorte, with industry "sluggishness" likely through mid-2025. Manufacturing, which represents 63pc of Inegi's seasonally adjusted industrial activity indicator (IMAI), decreased by 1.2pc after rising 0.7pc in November. Transportation equipment manufacturing output, which comprises 24pc of the manufacturing component, has fluctuated in recent months, falling 6.4pc in December after a 3.6pc uptick in November and a 4.4pc decline in October. Despite this, Mexico's auto sector achieved record annual light vehicle production and exports in 2024. However, Mexican auto industry associations confirm investment in the sector has begun to slow on uncertainty tied to concerns over potential US tariffs and slow economic growth in 2025. Taking the base case that tariffs do not materialize, Banorte expects manufacturing to rebound in the second half of the year as uncertainty lifts and interest rates fall with rate cuts at the central bank. Mining, which makes up 12pc of the IMAI, was lower by 1pc in December, following a 0.5pc increase in November. The decline was again driven by the oil and gas production, falling by 2.5pc in December to mark a sixth consecutive monthly decline for hydrocarbons output. Construction, representing 19pc of the IMAI, contracted by 2.1pc in December with setbacks in all categories. This matched the November result, with Inegi recording declines in construction in five of the last seven months. From a year prior, industrial production fell by 2.4pc in December , while manufacturing fell by 0.3pc and construction declined by 7.1pc in December. Mining was down by 6.2pc. B y James Young Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

US trade policy adds uncertainty to oil market: Opec


12/02/25
12/02/25

US trade policy adds uncertainty to oil market: Opec

London, 12 February (Argus) — Opec said today that the US' new trade policies have added "more uncertainty" into global oil markets. This uncertainty "has the potential to create supply-demand imbalances that are not reflective of market fundamentals, and therefore generate more volatility", Opec said in its latest Monthly Oil Market Report (MOMR). The producer group said the uncertainty has also "increased inflation expectations" and "made it more challenging to cut interest rates in 2025". US president Donald Trump started his new term in January with threats to impose a wide array of import tariffs on several big trading partners. Washington has so far announced new tariffs on imports from China, as well as on all US imports of steel and aluminium. And Trump says more tariffs are on the way. For now, Opec has kept its global oil demand growth projections for both 2025 and 2026 unchanged. For this year, the group sees oil demand growing by 1.45mn b/d to 105.2mn b/d, while in 2026 it sees consumption increasing by 1.43mn b/d to 106.63mn b/d. In terms of supply, the group has downgraded its growth forecast for non-Opec+ liquids for 2025 and 2026 by 100,000 b/d each to 1mn b/d for both years. The downgrade is driven by the US and Latin America. Opec+ crude production — including Mexico — fell by 118,000 b/d to 40.625mn b/d, according to an average of secondary sources that includes Argus . Opec puts the call on Opec+ crude at 42.6mn b/d in 2025 and 42.9mn b/d in 2026. By Aydin Calik Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Americas dominate Spain's crude imports in 2024


12/02/25
12/02/25

Americas dominate Spain's crude imports in 2024

Madrid, 12 February (Argus) — Spain's crude imports from the Americas climbed sharply in 2024 to account for more than half of total receipts for the first time on record. Spanish crude imports increased by 5pc on the year to more than 1.29mn b/d, according to petroleum reserves regulator Cores, driven by double-digit growth in receipts from the three largest suppliers the US, Mexico and Brazil. This combined with a respective doubling and tripling of imports from smaller suppliers Venezuela and Guyana to give the Americas a 53pc share of Spanish receipts in 2024, up from 47pc in 2023. Imports were 200,000 b/d below the Spanish refining system's 1.49mn b/d of crude distillation capacity, which like other European countries refineries continued to struggle with competition from cheap imported finished products. North America accounted for 31pc of imports. The US led suppliers for a second consecutive year, with receipts rising by 18pc to 214,000 b/d. Imports from Mexico climbed by 20pc to 161,000 b/d as higher supplies of lighter Olmeca and Isthmus grades more than offset lower amounts of heavy Maya crude at integrated Repsol's refineries. Receipts from Spain's second largest supplier Brazil climbed by 38pc to 181,000 b/d. Those from Venezuela more than doubled to 58,000 b/d after Repsol increased imports under its crude-for-debt deal with state-owned PdV. The Mideast Gulf accounted for just 8pc of Spanish crude imports in 2024, down from 12pc in 2023 as unrest in the region reshaped shipping routes. Receipts from Iraq dropped by 38pc to 38,000 b/d, from Saudi Arabia they fell by 15pc to 70,000 b/d and there were none from the UAE. Africa's share of Spain's crude slate narrowed in 2024. Receipts from Nigeria fell by 21pc to 129,000 b/d, and from Libya they fell by 13pc to 88,000 b/d. Opec's share of Spanish crude imports fell to a record low of 37pc in 2024 from 44pc in 2023 and around 50pc over the past decade. Its share was 35pc of 1.24mn b/d in December. Spain's year-on-year import growth slowed to 3pc in December from 14pc in November. Deliveries were lower at Repsol's 220,000 b/d Bilbao refinery ahead of maintenance in January, rose at Moeve's 244,000 b/d Algeciras facility after conclusion of work there and rose back to capacity at Repsol's 135,000 b/d Coruna after maintenance finished at the start of December. Spain imported crude from 15 countries in December, down from 17 in November as slates narrowed and receipts rose from Nigeria and Mexico. By Jonathan Gleave Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

California aims to expand alternative bunkers


11/02/25
11/02/25

California aims to expand alternative bunkers

New York, 11 February (Argus) — California lawmakers will consider expanding alternative marine fuels use by ocean-going vessels on the state's coast. State senate bill 298, introduced by state senator Anna Caballero (D), would require the California State Energy Resources Conservation and Development Commission (Energy Commission), the California Transportation Agency and the state board to develop a plan by 31 December 2030 for the use and deployment of alternative fuels at California's public seaports. The plan should identify significant alternative fuel infrastructure and equipment trends, needs, and issues and describe how the state will facilitate permitting and construction of infrastructure to support alternative fuels. The plan should also identify locations for alternative fuel infrastructure, provide a reasonable timeline for its installment and estimate the costs, including public or private financing opportunities. The bill also calls for the Energy Commission to convene a working group consisting of representatives of seaports, marine terminal operators, ocean carriers, waterfront labor, cargo owners, environmental and community advocacy groups, the Transportation Agency, the state board, the Public Utilities Commission, and air quality management and air pollution control districts. The working group will advise the commission. The US territorial waters, including California's, are designated as emission control areas (ECAs). In the ECAs, the sulphur content of marine fuel burned by ocean-going vessels is capped at 0.1pc. Thus ocean-going vessels within 24 nautical miles of California burn 0.1pc sulphur maximum marine gasoil (MGO). Ocean-going vessels could achieve the equivalent of 0.1pc sulphur marine fuel emissions by installing marine exhaust scrubbers. But California has banned their use. California is the only US state that has banned the outright use of marine scrubbers. California also requires that ocean-going vessels while at berth in California ports must either use shore power or use alternative technology such as batteries. The regulation came into force for container ships, reefers and cruise ships in 2023. It came into force this January for tankers visiting Los Angeles and Long beach and for roll on roll off vessels. Starting on 1 January 2027, it will apply to all tankers at berth in all California's ports. US harbor craft vessels (such as barges, commercial fishing vessels, excursion vessels, dredgers, pilot vessels, tugboats and workboats) in California's waters are required to burn renewable diesel (R99 or R100). By comparison, elsewhere in the US, harbor craft vessels are required to burn ultra-low sulphur diesel (ULSD). In January, Los Angeles ULSD averaged at $773/t and R99 at $962/t. By Stefka Wechsler Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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