Oil refiners curb output as coronavirus cuts fuel demand

LONDON (Reuters) - Oil refiners worldwide are reducing output or considering production cuts as the coronavirus outbreak keeps people at home and paralyses air travel, causing an unprecedented drop in fuel demand.

FILE PHOTO: Pump jacks operate in front of a drilling rig in an oil field in Midland, Texas U.S. August 22, 2018. REUTERS/Nick Oxford/File Photo

It is hard to gauge the decline in consumption as the situation changes daily and more cities shut down, but most analysts agree April demand could fall by 10% year-on-year, which would leave many refiners unable to operate at a profit.

The head of research at the world’s biggest oil trader Vitol said on Friday demand could fall by more than 10%, or 10 million barrels per day (bpd).

In Britain, INEOS shut down a 35,000 bpd crude unit at its 200,000 bpd Grangemouth refinery on March 17, according to industry monitor Genscape.

A source familiar with the plant’s operations said the shutdown was related to declining profit margins for fuels produced at a refinery, including aviation and motor fuels.

“Horrendous margins and even worse physical markets,” the source, speaking on condition of anonymity, said when asked about the cause of the shutdown.

A spokesman for the company declined to comment.

Oil major BP shut down a 70,000 bpd crude unit at its Gelsenkirchen (Scholven) oil refinery in Germany on March 18, Genscape said.

BP declined to comment. But two trading sources said the shutdown was an economic run cut.

In the United States, Marathon Petroleum Corp’s Los Angeles Refinery, California’s largest, began cutting production, sources familiar with plant operations said.

Phillips 66 cut production by at least 20% at its 139,000 bpd Los Angeles Refinery, a source familiar with plant operations said.

At the height of the outbreak in China, refineries at the world’s largest oil importer reduced output by at least 1.5 million bpd.


As planes around the world have been grounded, demand for jet fuel, once one of the biggest factors in oil demand growth, has collapsed, with prices for the fuel in Europe now at record lows.

Refiners in Europe and Asia are producing gasoline at a loss. While in the United States, the world’s biggest consumer of gasoline, profit margins fell to a record low this week.

“Refiners must cut runs now to manage the situation,” consultants FGE said in a note.

In France, where the population is under a government-enforced lockdown, oil major Total delayed the restart of its 102,000 bpd Grandpuits refinery near Paris by eight days to April 1, CGT union delegate Thierry Defresne said.

Other sources said the maintenance work at the company’s 110,000 bpd Feyzin refinery was suspended.

At Europe’s largest oil refinery, the 404,000 bpd Pernis plant in the Netherlands, Royal Dutch Shell on Monday said operations would continue and a major maintenance that it planned for early May will go ahead.

Additional reporting by Shadia Nasralla and Bozorgmehr Sharafedin; Editing by Giles Elgood, Kirsten Donovan, Veronica Brown and Barbara Lewis