European oil refining margins turn negative, fall to 6-yr low
Northwest European oil refining margins turned negative on Tuesday, falling to around -$0.49 a barrel, Reuters calculations showed.
Margins fell to their lowest since October 2013.
A sharp fall in gasoline and fuel oil margins in recent days precipitated the fall, with a relative strength in middle distillates failing to keep overall margins in positive territory, traders said.
“The return of refineries from maintenance has seriously reduced refinery economics, and this is not a sign of strong global oil product demand,” consultancy Petromatrix said in a note on Tuesday.
Traders and analysts were expecting that refiners, particularly simple ones that don’t have equipment to upgrade fuel oil into more valuable products, would have to cut runs.
Gunvor Group on Monday said it had shut one of its two crude distillation units at its Rotterdam oil refinery in the Netherlands as it was uneconomical to run. The unit will be down into next March when the 88,000 barrel-per-day refinery will undergo maintenance.
“The current price evolution indicates that there is not enough demand for the current output of oil products,” Petromatrix said.
Even margins for complex refineries have turned negative in recent days, traders said, with crude grades such as Russia’s Urals becoming uneconomic to process.
Source: Reuters (Reporting by Ahmad Ghaddar; editing by Jason Neely)