Oil report

U.S. refining outlooks remains bleak - Deloitte

 * Refiners face long period of thin profits - study
 * Industry still needs to cut 1 mln to 2 mln bpd
 HOUSTON, Dec 16 (Reuters) - U.S. refiners, despite a return
to profitability in 2010, still face the challenge of reducing
national capacity by 1 million to 2 million barrels per day to
match falling demand, Deloitte Services LP said in a study
released on Thursday.
 "Now the question is: What happens next? The short answer
is that depends on how many refineries are closed and how long
it takes," the report said.
 Regulations to improve automobile fuel-use efficiency and
increase the use of biofuels are expected to reduce the demand
for petroleum-based gasoline by as much as 20 percent by 2020,
the study said.
 New greenhouse gas regulations coming from the U.S.
Environmental Protection Agency and California "serve to
increase operating costs for refiners and may even result in
the closure of refineries that are unable to justify expensive
upgrades," according to the study.
 Refinery shutdowns in the past year have been offset by
planned capacity expansions, the report said.
 Refiners likely face a long period of thin profit margins
like they saw in the 1980s and 1990s, during which refineries
were sold off or shut down in a slow trickle.
 "It would be a long period of excess capacity: a refiner's
version of the Dark Ages."
 The interest of foreign state-owned oil companies in U.S.
refineries could help create that long period as refiners try
to keep refineries running in hope of selling the plants or
forming supply or distribution partnerships, as many did in the
'80s and '90s.
 "The arrival of a large contingent of newcomers would make
it much more harder for the U.S. industry to eliminate more
than 1 million barrels of excess refining capacity needed to
keep refining capacity healthy and, if combined with a solid
economic recovery, ensure solid profits over the next decade,"
the study said.
 In the past two years, several analysts have said U.S.
refiners need to reduce capacity to match declining demand,
with estimates of reductions running between 1 million and 4
million bpd.
 (Reporting by Erwin Seba; Editing by Walter Bagley)