According to BP PLC's (BP) Chief Economist Christof Ruehl, refining margins for the company in the fourth quarter will drop because of the large amount of global oil inventory.
Ruehl said, "We have bloated OECD product stocks - the highest for at least 12 years - caused by an increase in crude runs over the last few quarters. Just when you thought there was a decent few weeks in terms of margins, the existing product overhang points to short-term pressure on margins."
Ruehl added that usually margins in refining are historically lower in the fourth quarter, with eight out of the last ten years experiencing that.
This is year is no different, as refiners raised production because of higher margins earlier in the year, but the demand hasn't met the supply, putting downward pressure on margins.
Problems in Europe's strategy of so-called clean and renewable fuels is a problem as well, with it causing refineries there to be much more costly and less competitive.
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