Daily Management Review

Diminished Demand Due To Coronavirus Forcing Shut Down Of Global Oil Refineries


Diminished Demand Due To Coronavirus Forcing Shut Down Of Global Oil Refineries
The lockdowns in countries all across the world to combat the spread of the deadly coronavirus pandemic has dashed oil demand causing a huge slump in global refinery business even as the first news of shutdown of oil refineries emerge from India and Europe on Friday.
Force majeure was declared in India by refiners Indian Oil Corp and Mangalore Refinery and Petrochemicals and while MRPL in the process of shutting down its entire plant. On the other hand, temporary closure of its operations at its Ancona refinery, which has capacity of 85,000 barrels per day (bpd), was announced by Italy’s API, the company said.
In the second quarter of the current year, there is expected to be a drop of between 15 and 20 per cent in demand in fuel globally because of the virus pandemic which has so far killed more than 24,000 people, brought global airline travel to a complete halt and resulted n various governments announcing national lockdowns keeping residents at home to prevent the spread of the virus.  
Refiners are expected to be overwhelmed by the fall in demand of oil and oil products globally because of the pandemic while the slump in oil prices after the breakdown of the discussions between Saudi Arabia and Russia over production cuts last month also has hot refiners.
Spain’s Repsol would cut runs by about 10% at its complex refineries, according to reports.
The sliding petrochemicals demand has forced it to reduced runs by up to 40 per cent and closed down its Panipat naphtha cracker plant, said IOC, India’s top refiner, in a letter to crude suppliers. Asia accounts for more than one third of the global refining capacity.
While shutting down plats for maintenance, refiners and operators in Japan, South Korea and Thailand are also looking at more run cuts while they are already running at reduced rates.
A rare move to sell prompt crude as it plans to cut output in April was made by India’s Reliance Industries which operates the largest refining complex of the world.
Production has also been reduced by refiners in the United States which includes production units in the Los Angeles area which is one of the busiest hubs for air travel, as well as in the Baytown facility of Exxon in Texas. Tumbling demand in the US is forcing the closure of the e Baytown plant, which is the largest plat of Exxon in the United States.
In the most recent week, there was a 10 per cent drop in products supplied, a drop of 2.1 million bpd on the overall in the United States.  In the coming weeks there can be a drop in demand by almost half in for gasoline in the United States according to the estimates of the IHS Markit.
Production has been scaled down by some refineries in Britain and Germany in Europe while analysts expect similar action being taken by many other refiners in the region. A policy of adaption of production to falling demand was announced by ExxonMobil’s French subsidiary on Friday.