Global refining runs, product demand to rise in 2H: IEA

Global refining throughput will rise by 700,000 b/d year on year in the second half of 2019, thanks entirely to expansion in China and the Middle East, the IEA said today.

In its monthly Oil Market Report (OMR), the IEA forecast refined products demand growth at 900,000 b/d over the same period.

This comes after a subdued first half of the year, when global refining throughput fell year-on-year and refined products demand growth was just 300,000 b/d, the IEA said.

It revised lower its forecast for refinery throughput in the third quarter, to 83.6mn b/d from 84mn b/d, and revised upwards its forecast for the fourth quarter to 83.6mn b/d from 83.5mn b/d.

The IEA said global refining throughput fell by 90,000 b/d year on year in the first half, when there was a 720,000 b/d increase in China alone. Chinese refining activity surged to a new record level of 13mn b/d in June, up by 800,000 b/d on the year, the IEA said.

The IEA revised significantly higher its throughput estimates for China for the February-May period from its previous report: by 130,000 b/d for February, by 190,000 b/d for March and by 300,000 b/d for April and May. This has rebased the IEA's entire China refining view, resulting in an upward revision to forecast crude runs of 245,000 b/d this year and of 440,0000 b/d in 2020, compared with the previous report.

Middle East and European refining activity was higher year-on-year in the first half, by 260,000 b/d and 50,000 b/d respectively. The latter could have been higher still but for the Druzhba pipeline contamination. But, this higher throughput in Europe, China, and the Middle East was not enough to offset a combined 1.1mn b/d decline in the rest of the world, led by Latin America where there was a 550,000 b/d loss in throughput from Venezuela and from the closure of refineries in Trinidad and in Curacao. North American runs declined by 245,000 b/d, with lower activity in the US.

Stocks of OECD Americas oil products increased by 32.8mn bl on the month in June, significantly larger than the typical gain of 6.5mn bl. Middle distillates and fuel oil stocks increased counter-seasonally by 4.4mn bl. Other product inventories rose by 27.9mn bl, which the IEA attributed to increased US LPG availability. Gasoline stocks fell by 100,000 bl.

OECD Europe product stocks increased by 4mn bl on the month, with all categories showing counter-seasonal gains or smaller-than-usual falls. Middle distillates and fuel gained 1.4mn bl and 1.1 mn bl. Other products increased by 2.3mn bl and gasoline declined by 800,000 bl, compared with a typical fall of 2.9mn bl.