The global oil market could experience a surplus supply of gasoline as early as 2017 which, combined with a deficit of middle distillate and fuel oil, would put significant pressure on refiners by the end of the decade, according to Wood Mackenzie Monday.
The latest oil product analysis from Wood Mackenzie, which tracks 745 operational refineries globally, shows that gasoline yields are expected to increase by 1 percent over the next 15 years. This means even if there are no new refineries built beyond 2020, there will still be an oversupply of gasoline globally for several years.
The surplus supply is the result of falling demand in the key market of North America, combined with continued declines in Europe and Asia, which offsets most of the demand growth seen in the emerging Asian economies, in Latin America, the Middle East and Africa, Research Director for oil product markets at Wood Mackenzie, Jonathan Leitch, explained.
Mackenzie asserts that at present refiners are enjoying healthy margins as they are taking advantage of low oil prices, unplanned refinery outages and a slower-than-expected ramp up of new facilities - three new refineries in the Middle East - all of which have helped keep oil product markets tight.
However, Wood Mackenzie cautions that oil demand growth will eventually slow in the long term due to increased efficiency and alternative fuel sources by 2019 lowering global gasoline demand.
The research and energy consultancy expects margins to fall to the minimum sustainable level for some refiners and has identified key market indicators that could see gasoline cracks bottom out at low levels not seen since 2013.
"Although gasoline cracks have been very strong this year, we could see a complete reversal in the market in just two years. Outlook for 2016 remains similar and in many ways stable, but in 2020 we start to see a glut of gasoline supply developing in excess of 30 million tonnes - which doesn't go away for a decade," Leitch said.
Leitch added that "refiners will continue to invest in refining operations to meet global demand and increasing stringent product specifications to comply with environmental legislation, which could see an addition in net refining capacity by 2020."
He added that as a result European, Asian refiners will be put under significant pressure and the U.S. will also suffer particularly in areas without access to export markets.
By Gokhan Yildiz
Anadolu Agency
gokhan.yildiz@aa.com.tr