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10.12.2020 11:00 AM
Oil refineries are closing in the US

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It was inconceivable that many of the world's refineries would be caught between low demand for finished products and rising inventories, as country restrictions continue to constrain population activity. Aside from this, the warm December expected this year is also expected to threaten demand for finished products. It is possible that many of the old small refiners will not survive at all.

According to HIS Market, eleven U.S. refineries are scheduled to close.

One of the largest oil refineries in the United States, Royal Dutch Shell Convent in Louisiana, closed after failing to find an interested buyer. But, according to Reuters, the Dutch oil company is closing six more refineries because it is unable to sell those plants.

Marathon Petroleum, another one of the largest oil refineries in the United States, is also closing. Several other refineries are closing, including Gallup, New Mexico, and a refinery in Martinez, California.

Japanese News Corp. also closed their refinery in Osaka, but the real pain is in Australia.

In Australia, the aging 65-year-old Kwinana refinery in Perth is closing because it is simply "no longer economically viable."

PBF Energy has halted production at its 85,000 barrels per day refinery in Paulsboro, New Jersey. Phillips 66 closed its Alliance refinery ahead of hurricane Sally and left it closed for better days.

Other refineries are not shutting down but are simply extending maintenance.

Australia's Caltex is a prime example of this when it extended maintenance at its only oil refinery in Lytton in early April. Caltex vaguely said it would restart the refinery when conditions improve.

Overall, Wood Mackenzie said that almost 10 percent of Europe's high-cost refineries, which produce 1.4 million barrels a day, are at serious risk of closing over the next three years.

None of these events bode well.

More sober analysts are calling for China to surpass the United States as the world's largest processor. But for what?

First, demand for petroleum products in Asia has not experienced such a significant drop in demand as it has in America and Europe which are still in the process of significant shutdowns that restrain activity. This, combined with China's purchase of cheap crude oil, has led some analysts to anticipate China overtaking the United States as the world's largest oil refiner.

According to the International Energy Agency, a total of more than 1.7 million barrels per day of refining capacity in the United States, Japan, Australia, and other countries will be decommissioned this year and the next. But at the same time, China, India, and the middle East are planning to expand refineries that are larger and much more efficient.

According to S&P Platts, oil demand will not return to 2019 levels until 2022.

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Andrey Shevchenko,
Analytical expert of InstaForex
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