Diesel Regains Glow for Europe's Refiners

European diesel refining profits are outperforming expectations as a string of shutdowns at diesel production units this autumn limits supplies.

 

The sum of the works could take out close to 300,000 barrels per day (bpd) of diesel production in northwest Europe and the Mediterranean, traders said, lending support to profits for the fuel despite a flood of imports that are expected from the United States, Russia, the Middle East and Asia.

 

"There are quite big hydrocrackers down for maintenance," one trader said. "We may have underestimated the impact on diesel."

 

Diesel-making hydrocrackers including a 52,000 barrel per day (bpd) unit at Total's Gonfreville refinery in northern France, Royal Dutch Shell (RYDAF)'s 51,000 bpd unit at Godorf in Germany and Repsol's 45,000 bpd hydrocracker at Cartagena in Spain will all close for planned work in the coming months.

 

Europe's refinery margins - the money made from turning crude oil into products such as gasoline and jet fuel - had been expected to fade from multi-year highs in the autumn as high stocks of distillates such as diesel and heating oil joined with notably light maintenance plans.

 

But diesel refining margins have held at relatively high levels of around $15 a barrel in recent weeks, confounding some earlier expectations for declining profits.

 

"I expect (margins) to get a little stronger from recent levels, perhaps reaching last year's levels," said Steve Sawyer, head of refining at FGE Energy, said.

 

High stocks of refined products in the Amsterdam-Rotterdam-Antwerp storage hub would still weigh heavily on prices, Sawyer said.

 

While the headline figure for the amount of Europe's refinery capacity that shut down for maintenance this autumn is estimated to be anywhere from 45 to 75 percent lower than the five-year average, several large hydrocrackers, which produce distillates, are part of those works.

 

According to Sawyer diesel units are bearing the brunt of work partially because the refineries that operate them have less flexibility in terms of their shutdowns.

 

"Secondary units cannot go as long between turnarounds as crude distillation units," Sawyer said.

 

Europe's refineries have run at full steam, and postponed maintenance, to pump out the gasoline coveted by drivers in Asia and the United States following a more than 50 percent drop in oil prices since the summer of 2014. [ID:

 

Margins for gasoline hit 10-year highs in July, but the production also pressed distillate storage in the key Amsterdam-Rotterdam-Antwerp hub to all-time highs.