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Fuel markets to stay tight till mid-2020s as refining shrinks
Published by Jessica Weisman-Pitts
Posted on September 13, 2022
2 min readLast updated: February 4, 2026
Global Banking & Finance Review®
Company
Published by Jessica Weisman-Pitts
Posted on September 13, 2022
2 min readLast updated: February 4, 2026
By Ahmad Ghaddar
LONDON (Reuters) – Crude oil refining capacity has shrunk by a record 3.8 million barrels per day from March 2020 to mid-2022 as demand expanded, setting the stage for fuel markets to remain very tight until at least mid-decade, International Energy Forum and S&P Global research showed.
The fall in capacity comes as oil demand rose by 5.6 million bpd over the same period, the report released on Tuesday said.
At the same time, about 2 million bpd of net capacity is expected to come online by the end of 2023, with delays to these timeline likely to arise, the report said.
“This puts pressure on all available refining capacity to run at high utilisation levels to keep up with demand.”
Oil product markets experienced sharp upheaval since the COVID-19 pandemic was declared in March 2020.
While the pandemic decimated demand globally and killed profit margins, the post-pandemic recovery and Western sanctions on Russia over its invasion of Ukraine have tightened fuel markets sharply, leading to record profit margins earlier this year.
Planned refinery additions and closures https://fingfx.thomsonreuters.com/gfx/ce/dwvkrxjxepm/Refining%20capacity%201.PNG
Record profits for refiners are unlikely to lead to new investment in expanding global refining capacity, however, according to the report, amid “the expectation that the energy transition could make refineries stranded assets has deterred investment”.
A sharp rise plug-in electric vehicle sales, which are expected to grow from 6.6 million last year to 35.7 million at the end of the decade, will likely displace 4 million bpd of gasoline and diesel demand.
The falling refining capacity comes at a time when global fuel inventories are tight and as Russian and Chinese exports of fuels are being constrained, the report said.
Sanctions and embargoes have displaced nearly 3 million bpd of Russian products that are not easily rerouted.
And Chinese product exports are down 30% from 2019 levels as the government has strategically shifted to prioritising domestic markets.
(Reporting by Ahmad Ghaddar; Editing by Marguerita Choy)
Crude oil refining is the process of converting crude oil into useful products such as gasoline, diesel, and other petrochemicals through various chemical processes.
Fuel market tightness refers to a situation where the supply of fuel is insufficient to meet demand, often leading to higher prices and limited availability.
Profit margins are financial metrics that indicate the percentage of revenue that exceeds the costs of goods sold, reflecting a company's profitability.
Electric vehicles (EVs) are automobiles that are powered by electric motors instead of internal combustion engines, contributing to reduced fuel demand and emissions.
Sanctions are restrictions imposed by countries or international bodies on trade with specific nations, often affecting oil exports and impacting global fuel supply.
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