Damaged refineries in the Middle East and Russia and insufficient capacity elsewhere to offset the supply disruptions will likely keep global fuel prices elevated into the next year, analysts say.
The Middle East conflict and the Iranian and Houthi strikes on Persian Gulf facilities have slashed supply and deliveries from the region, while intensified Ukrainian strikes on Russian refineries have prompted a ban on diesel exports out of Russia.
As a result, the global fuel markets are tightening, also because capacity elsewhere, including in the United States, cannot offset the loss of refined product flows.
“Refining capacity will not come back so soon,” Nikhil Agarwal, managing director of Globestar Energy, said at Energy Trading Week Middle East in Dubai, as carried by The National.
“Bapco is gone, the GTL Qatar is gone, Russian refineries are gone. It will take years to build them back and bring them on board,” the expert said.
“Crude is surplus globally, but there is no refining capacity available to refine it and bring it to market,” Agarwal said, echoing other experts who say that the fuel – especially diesel – markets show the real stress in the oil complex.
Refinery crude throughputs in July remained nearly 5 million barrels per day (bpd) below year-ago levels, at 80.9 million bpd, “with capacity elsewhere in the system currently unable to offset product supply bottlenecks,” the International Energy Agency (IEA) said in its monthly report in August.
Refining fundamentals are very tight and getting tighter with the issues in Russia and the Middle East, Brian Mandell, Executive Vice President of Marketing & Commercial at Phillips 66, said on the Q2 earnings call in early August.
“We have 7 million barrels a day of refineries down in Asia and the Middle East and another 1.4 million barrels down in Russia. And the refineries, depending on the damage and the ability to get spare parts, are going to take a good long time to get back online,” the executive added.
By Tsvetana Paraskova for Oilprice.com
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