* Crude processing rates to decline by 10 pct in Sept.-Oct.
* Refiners to deepen crude run cuts due to weak margins
* High oil prices on Mideast troubles to keep lid on profits
By Ron Bousso
LONDON, Sept 4 European refineries will cut output by about 10 percent in the next two months through maintenance and reduced operating rates, but it will probably not be enough to pull the industry out of the doldrums, traders and industry officials said.
Refiners in northwest Europe and the Mediterranean have struggled in recent weeks with extremely weak profit margins, or cracks, due to soaring crude oil prices.
"It looks rather dire for refiners at the moment. They will need to react in one form or another such as maintenance, run cuts or even shutdowns," one trader said.
If poor profits last longer than the next few months, some of the current shutdowns could stretch to the long term, analysts said.
Plant overhauls will take down 1 million barrels per day (bpd) of capacity in September and 1.25 million bpd in October, according to Reuters data and trading sources.
The turnaround programme includes BP's 400,000 bpd Rotterdam refinery, Exxon Mobil's 246,000 bpd Antwerp refinery and Royal Dutch Shell's 412,000 bpd Pernis refinery.
While some refineries have moved planned autumn maintenance forward, others have chosen to reduce their crude processing rates given that oil prices are high and supplies are scarce.
Overall, they cut around 500,000 bpd to reach a total of 11.5 million bpd in August.
Refinery runs are set to decline by an additional 250,000 bpd in September and October, traders said.
Taking maintenance and crude processing cuts together, European refining throughput will decline to about 10-10.25 million bpd over the next two months, a third less than nameplate capacity.
Crude supplies in the region have fallen due in large part to a drop in Libyan oil exports to the lowest level since the 2011 civil war, traders said.
Unlike that crisis, no alternative crude sources are currently available.
"Libya is a big problem in Europe, specially for refineries in the Mediterranean, where there is a lot of supply missing. Refining margins have been pretty bad all year, and the situation is getting worse," said Olivier Jakob, an analyst at Petromatrix.
For example, Libyan oil typically accounts for 27 percent of Italy's total crude imports, compared with 10 percent for France and Germany, he said.
"For now the answer to lower supplies from Libya is to run at lower rates," Jakob added.
Refining margins traditionally rise during maintenance season due to lower demand for crude and higher prices for oil products.
But that may not be the case this time round. Crude oil prices are likely to remain elevated due to severe supply disruptions not only in Libya, but also in Iraq, Russia and the North Sea, traders said.
On top of that Iran's oil shipments have been curtailed by sanctions.
"There is a lot of capacity going down, but then again we do not have a lot of crude available either, with continued losses at Iraq and a near full loss in Libya," a trader said.
"The typical September-October crude stock builds that result from refinery maintenance will be pretty much wiped out by the supply outages," he said.
Crude oil prices are unlikely to drop given the tight supplies, traders said.
"There is more Urals crude available. but Libya does not seem to be easing, so I do not expect a big drop in prices," a crude oil trader said.
As a result, refineries could decide to extend maintenance or simply not resume operations, traders and analysts said
"If the refining margins do not improve during maintenance, refineries may just stay shut after maintenance is complete," Jakob said.