January 5, 2018 / 11:23 AM / 10 months ago

European refining margins set for rebound - Morgan Stanley

LONDON, Jan 5 (Reuters) -

* The bank’s spot European margin indicator fell to $6.50 a barrel from around $8 a barrel in mid-October, largely on the back of a rally in Brent futures, but forward margins held up

* Looking forward, margins could rebound due to firm demand, a heavy maintenance schedule and low inventories, the bank said in a note

* European oil demand grew around 140,000 barrels-per-day (bpd) in Jan-Oct 2017, in sharp contrast to the declines of the last decade, and is expected to continue growing, the bank said

* 1.5 million bpd, or 11 pct, of European refining capacity could go offline in May

* A heavy maintenance season early this year in the Middle East could eat into European imports from there

* Early March will see almost 1 million bpd of capacity offline in the Middle East, partly because Saudi Arabia’s 400,000 bpd Yanbu refinery closes for 7 weeks, Morgan Stanley said

* Amsterdam-Rotterdam-Antwerp oil product inventories have already contracted to their five-year average with middle distillate stocks already below that level

* If demand is up 50,000 bpd y-o-y by 2Q18, and an incremental 150,000-200,000 bpd of capacity is offline, European refinery utilisation could reach over 94 pct, with a spike towards 97 pct in May (Reporting by Ahmad Ghaddar; Editing by Elaine Hardcastle)

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