"Golden age" of oil refining margins to end

By Ikuko Kao - Analysis

LONDON (Reuters) - The global "golden age" of record refining profits is likely to be over by the end of the decade thanks to more capacity from new plants and higher costs due to record crude prices, industry analysts say.

Signs the boom is faltering have already emerged. ConocoPhillips (COP.N: Quote, Profile, Research) suspended production at its German refinery for a month in August due to low margins, an unusually long shutdown in the peak summer driving season.

Chevron Corp (CVX.N: Quote, Profile, Research), the second-largest oil major in the United States, said earlier in October it would see its third-quarter net income dropping significantly from the second quarter due to a sharp fall in its refining margins.

Some industry experts say this is the beginning of the end of the refining industry's "golden age" which began in 2004 when margins started rising due to global demand growth and the shortfall in refining production capacity.

"Margins will come down from 2004-2007 record levels by the end of the decade as significantly more capacity additions will occur in 2008-2010 when compared with 2000-2006," Karl Nietvelt, director and senior oil and gas analyst with Standard and Poor's, said at an industry conference in Brussels last week.

Record high crude prices are likely to keep pressuring margins. At the same time, any global economic slowdown caused by the credit crunch could curb fuel consumption.

International benchmark U.S. crude futures hit a new record above $93 barrel on Monday and they are set to advance toward $100.

They remain above $90 to September 2009, and above $78 to the end of 2015.