Refining capacity shortage may keep fuel prices high through 2027 — OilPrice
Damage to refining capacity in the Middle East and Russia, as well as a lack of spare capacity in other regions, could keep global fuel prices high throughout the coming year. OilPrice reports, citing analysts' estimates.
Petroleum product supplies are declining
According to the publication, the conflict in the Middle East, as well as strikes by Iran and the Houthis on facilities in the Persian Gulf, have reduced supplies and shipments of petroleum products from the region. At the same time, intensified Ukrainian strikes on Russian oil refineries, OilPrice writes, became one of the factors behind the introduction of a ban on diesel fuel exports from Russia.
Losses in petroleum product flows cannot be offset by other refining capacity, including in the United States, the publication notes. Against this backdrop, the global fuel market, especially the diesel market, is becoming tighter, although a surplus of crude oil remains on the global market.
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Restoring capacity will take time
Globestar Energy Managing Director Nikhil Agarwal said at the Energy Trading Week Middle East conference in Dubai that restoring lost refining capacity will not happen quickly. In his assessment, Bapco, GTL Qatar and Russian oil refineries may require years to be rebuilt and return to operation.
In its August monthly report, the International Energy Agency said that refinery crude processing in July amounted to 80.9 million barrels per day. This is nearly 5 million barrels per day less than a year earlier. The agency noted that available capacity in other parts of the system is unable to compensate for bottlenecks in petroleum product supplies.
Phillips 66 Executive Vice President for Marketing and Commercial Brian Mandell said in early August that refineries with a combined capacity of 7 million barrels per day were offline in Asia and the Middle East, while another 1.4 million barrels per day were offline in Russia. According to him, restoration timelines will depend on the extent of the damage and the availability of spare parts.
