London — The International Energy Agency Friday predicted increased competition in the refining sector as "capacity additions surge between now and end-2019." Receive daily email alerts, subscriber notes & personalize your experience. In its latest monthly report, the IEA expects refinery runs to grow by 1.3 million b/d in 2019 against 1 million b/d product demand growth. This year global refinery runs are set to grow by 900,000 b/d, the IEA said. Capacity additions of more than 2 million b/d present a "looming challenge" as new refineries are set to come on stream from Q4 onwards, the IEA said. However, the "bulk of additions" are likely to start ramping up operations in the second half of 2019. New capacity will mostly come from the East of Suez region with new complex refineries in China, Saudi Arabia and Malaysia. New capacity is also coming on stream in Turkey and Canada. Another new development is the "strong petrochemical orientation of the new refineries," especially in China, the International Energy Agency said. Meanwhile, the new capacity coincides with a "truly unpredictable period" for refining margins, according to the report. The recent surge in crude prices has hurt refining margins, which in late September-early October "fell to their lowest levels since the beginning of the year." Further uncertainties come from developments around crude from Iran and Venezuela as well as the IMO 2020 sulfur cap for marine fuel. In September, the "rapid rise in crude oil prices" led to margins crashing in some regions, with complex margins halving in Northwest Europe and simple margins falling into negative territory "as fuel oil discounts to crude returned to double digits after a few strong months." Margins also recorded high absolute losses in the Mediterranean but "remained at higher levels than in the North." Singapore margins were "somewhat less pressured, especially as Dubai weakened versus Brent" but that was "from an already lower regional margin base when compared to other hubs." US Gulf coast margins fell to single digits "in an unusual occurrence," partly on high utilization rates. From the second half of 2019 the agency expects product cracks to start pricing in the new marine bunker fuel requirements. "The most likely scenario is an increase in diesel cracks and a decline in high sulfur fuel oil cracks," the IEA said. Meanwhile, a new tax system in Russia could lower domestic utilization rates, although this could be offset by other legislative changes, said the IEA. This summer two separate laws were approved in Russia, whereby Russia's crude oil export duty is phased out by 2024, while a "negative excise duty," or excise refund, is introduced, on crude processed by the country's refineries. --Elza Turner, elza.turner@spglobal.com --Edited by Jonathan Loades-Carter, jonathan.carter@spglobal.com
The International Energy Agency (IEA) has forecast growth in refinery runs globally of 1.3 million barrels per day (bpd) by the second half of 2019 compared with demand growth of one million bpd. The new capacity will be driven by the opening of complex refineries in China, Saudi Arabia and Malaysia combined with the growth of existing operations in Turkey and Canada, the IEA said.