A global gasoline glut is set to hit refiners as soon as 2017, according to a new industry report.
Wood Mackenzie said its product market forecast shows a surplus of gasoline is expected to flood the market as early as 2017 which, combined with a deficit of middle distillate and fuel oil, will put significant pressure on refiners by the end of the decade.
“This will mark a turning point for the refining industry which is currently struggling to meet gasoline demand growth of approximately 420,000 per day (kb/d) thanks to refinery outages in Latin America and the delayed ramp up of new facilities in the Middle East,” said the research note.
As a result, the oil product market has remained tight and refiners are enjoying healthy margins, aided by low oil prices which have helped to reduce costs.
“However, in the longer-term we expect global oil demand growth to slow, lowering gasoline demand thanks to increasing efficiency and alternative fuel sources. In particular, there will be strong growth in liquefied petroleum gas (LPG) supply from natural gas liquids (NGLS) in North America and the Middle East, causing margins to bottom out at minimum sustainable levels for Europe and Asia by 2019,” it continued.
“Furthermore, the ramp up of three new refineries in the Middle East – which together will add 1.2 million barrels per day (mb/d) in capacity – plus the stabilisation in operations in Venezuela, could compound any prolonged period of oversupply.
“Refiners will continue to invest in refining operations to meet global demand and comply with environmental legislation which could cause and additional 5.5 mb/dd in net refining capacity by 2020.
“This would put pressure on Europe and Asia for further capacity consolidation while the US refining sector may also start to suffer.”
