The global oil products market has entered a sustained period of oversupply that will squeeze refinery margins for the remainder of the year, the IEA said today.
A potentially larger maintenance programme next year, to allow refiners to catch up with work deferred this year because of the Covid-19 pandemic, is likely to weigh on refining activity in 2021, it said, and citing poor demand said that it does not expect a full rebound before 2022.
The pressure on refining margins will be partially a result of sharp increase in oil products stocks during the pandemic's peak. The IEA said that total products stocks rose by 58.5mn bl, or nearly 2mn b/d, in April and by 0.3mn b/d in the first quarter. The April stocks rise came even as global refining intake fell by 6.6mn b/d month-on-month to 68.8mn b/d — down by 12.3mn b/d on the year. Early indications suggest that May throughput fell by a further 0.9mn b/d, the IEA said.
The large build in stock levels is likely to have been a key factor behind what the IEA called a "freefall" in refining margins in May. But it expects products stock draws in the second half of the year, as weak margins act as a drag on refining activity.
Globally, the IEA forecasts refinery throughputs to decline by 5.4mn b/d this year and then to rise by 5.3mn b/d in 2021. It revised upwards its estimate for 2020 throughput to 76.4mn b/d from 75.8mn b/d in its previous monthly Oil Market Report. Its revised up its forecast for non-OECD runs by 300,000 b/d to 41.5mn b/d, and its estimate for OECD runs to 34.8mn b/d from 34.6mn b/d, both compared with its previous report.
In its first estimates for 2021, the IEA forecast a broad rebound in throughput, to 36.9mn b/d for the OECD and 44.8mn b/d for non-OECD, giving a total of 81.7mn b/d.
