Refiners Hit Hard by Fuel Demand Destruction

Refiners around the world have been hit hard by fuel demand destruction caused by lockdowns and stringent travel restrictions.

That’s according to data and analytics company GlobalData, which said the travel restrictions have wiped out the market for fuel transportation and long storage durations have led to the deterioration of products such as gasoline and jet fuel, as well as increased inventory costs for refiners.

As a result, refiners across the world have been forced to cut production rates despite falling and “attractive” crude prices, GlobalData outlined.

“In the wake of the Covid-19 outbreak and plunging fuel demand, global refinery operators had no option other than to under-utilize their refinery capacities, delay maintenance activities, slash capital expenditure, and stall avoidable projects to conserve cash and tide over the current depressed market scenario,” Haseeb Ahmed, an oil and gas analyst at GlobalData, said in a company statement.

“To navigate successfully through the current market scenario, refinery operators may look at building a robust business continuity and contingency plan to ensure minimal impact on critical operations; identify and resolve immediate challenges posed by Covid-19 to the company’s stakeholders; focus more on remote operations through automation and digitalization and less on employee intensive operations to tackle any such situations in future,” Ahmed added.

Rystad Energy’s latest demand forecast, which takes into account developments that have occurred up to and including May 26, expects 2020 global demand for road fuels to drop by 9.9 percent, or 4.7 million barrels per day (MMbpd), to 42.7MMbpd. Jet fuel demand is expected to drop by almost 40.8 percent, or 2.9MMbpd, to 4.3MMbpd this year, according to Rystad.

Back in April, the BBC reported that well over 100 countries had instituted either a full or partial lockdown by the end of March this year and that “many others” had recommended restricted movement for some, or all, of their citizens.

As of June 1, there have been six million confirmed cases of Covid-19 globally, with 371,166 deaths, according to the latest data from the World Health Organization.

To contact the author, email andreas.exarheas@rigzone.com