Oil refiners in Asia, Europe, and the US are experiencing a drop in profitability to multi-year lows, signaling a downturn for an industry that had previously enjoyed surging returns post-pandemic.
This slump highlights the extent of the current slowdown in global demand.
This slump highlights the extent of the current slowdown in global demand, Ahmad Ghaddar, Trixie Sher Li Yap, and Shariq Khan reported for Reuters.
The weakness is further evidence of declining consumer and industrial demand, especially in China, where economic growth is slowing and electric vehicle adoption is on the rise.
The opening of new refineries in Africa, the Middle East, and Asia has added to the downward pressure.
Refiners such as TotalEnergies and trading firms like Glencore saw significant profits in 2022 and 2023 due to supply shortages caused by Russia's invasion of Ukraine, disruptions in Red Sea navigation by Houthi militants, and a strong post-pandemic demand recovery.
"It certainly looks like the refining supercycle that we've experienced over the past few years may now be coming to an end, with supply from newly inaugurated refineries finally catching up with slower-growing fuel demand," said Commodity Context analyst Rory Johnston.
Singapore refining profits, a bellwether for Asia, fell to $1.63 a barrel on Sept. 17, a seasonal low since the same period in 2020. On the same day, Asia's diesel margins hit a three-year low, according to LSEG data, with the weak Chinese economy being a major factor.
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