Refiners around the world have been announcing permanent closures of refinery capacity this year after the pandemic crushed fuel demand worldwide, and significant overcapacity still remains, the International Energy Agency (IEA) said on Thursday.
In its monthly Oil Market Report, the EIA said that permanent shutdowns of refinery capacity had reached 1.7 million barrels per day (bpd). But another more than 20 million bpd crude oil distillation capacity now sits idle, the Paris-based agency said, noting that “there remains significant structural overcapacity.”
In the past few months alone, refiners have announced more than ten permanent closures of refineries, with the highest capacity planned for closure, 1 million bpd, in the United States, according to the IEA.
“There were capacity shutdowns planned for 2020-2021 prior to COVID-19, but the bulk of the new announcements reflect pessimism about refining economics in a world suffering from temporary demand collapse and structural refining overcapacity,” the agency said in the report, as carried by Reuters.
Refiners in the United States are idling refinery capacity and cutting jobs to cope with the losses stemming from the demand crash in the pandemic.
Refiners are also shutting down permanently or converging oil refineries as the demand crash from the pandemic continues to crush refining margins.
Several refiners and oil majors have recently announced permanent closures in the United States and Asia, while analysts believe that some high-cost refineries in Europe could also be shut down over the next few years as margins for processing crude into fuels are expected to remain depressed.
Shell said this week it would halve the crude oil processing capacity of its largest wholly owned refinery in the world, Pulau Bukom in Singapore, as part of its ambition to be a net-zero emissions business by 2050 or sooner.
Also this week, Petroineos, a joint venture of Ineos and PetroChina, said it plans to permanently close some units at the 210,000-bpd Grangemouth refinery, the only refinery in Scotland, which will cut the facility’s refining capacity to 150,000 bpd.