The refining industry is experiencing a significant downturn as the lucrative supercycle, which began after the pandemic, draws to a close. Factors such as a sluggish Chinese economy, increased refining capacity in the Middle East and Africa, and weak demand in developed nations have driven refining margins to their lowest levels in years. U.S. refiners are feeling the impact, with profits sharply declining from record highs seen over the past two years.
The conclusion of the summer driving season has further contributed to reduced margins across Asia, compounded by lackluster fuel demand and economic growth in China. In early September, refining margins in Asia reached their lowest point for this time of year since 2020, prompting potential cutbacks in production rates, particularly in China.
European refiners are also under pressure, with companies like Repsol and Eni considering reduced run rates. Gasoline profit margins in Europe averaged just $12.10 per barrel in August, a staggering 61% drop from the same month last year, while diesel margins plummeted to their lowest since December 2021.
In Singapore, the refining profit margin fell to its weakest level for the season since 2020, driven by the influx of new facilities such as Africa’s largest refinery in Nigeria, the Al Zour refinery in Kuwait, and Duqm in Oman, which are undermining profits for smaller refineries, particularly in Europe. The owners of Scotland’s Grangemouth refinery have announced plans to close the facility in the second quarter of 2025 due to its inability to compete with the newer, more complex facilities in Asia, Africa, and the Middle East.
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