By OGJ editors
HOUSTON, Sept. 20 -- European refining margins have rebounded but remain at or below breakeven levels, and Singapore refining margins are rising at what appears to be unsustainable levels, said L. Bruce Lanni, senior analyst for A.G. Edwards & Sons Inc., St. Louis.
"Refining margins had spiked in response to a shortage of gasoline due to strong demand from the summer driving season being experienced both in Europe and the US, but rebuilding gasoline inventories on both sides of the Atlantic and high oil prices have more than offset unscheduled refinery maintenance," Lanni said.
Companies with the most leverage to this region include BP PLC, ConocoPhillips, ExxonMobil Corp., and Royal Dutch/Shell Group, Lanni said.
September's refinery maintenance season in Europe was estimated at 1.2 million b/d, which Lanni called "relatively heavy. . .most affected are those that operate in countries that use sulfur above 50 ppm as they complete upgrades to meet lower European sulfur regulations that begin in 2005. The large concentration of maintenance in 1 month could possibly contribute to a spike in refining margins as any excess refining capacity should be greatly reduced."
Singapore margins
"Strong Asian demand, led by China, has helped to create the current tight regional supply-demand situation. The recent surge in demand for crude
products in Asia has helped to alleviate what, until not so long ago, was a capacity overhang issue," he said.
But Lanni noted that new capacity coming on stream during 2005-06 in China and India probably means that current margin levels are not sustainable even if demand continues to surprise to the upside.
US margins
US refining margins posted a slight increase in August, particularly along the West Coast. Regionally, the strongest US refining margins are along the Gulf of Mexico coast.
"Nevertheless, margins remain nearly 50% below the peak levels reached this past July," Lanni said.