The IEA has revised up its 2022 forecast for global refinery runs to within 400,000 b/d of pre-Covid levels.
In its latest Oil Market Report (OMR), the IEA said it expects global throughput to average 81.2mn b/d this year, up by 100,000 b/d from its previous forecast and 3.6mn b/d higher than last year. Runs averaged 81.6mn b/d in the pre-crisis year of 2019.
The 2021 estimate has been revised up by 300,000 b/d from the previous OMR to 77.6mn b/d, driven by a near 1mn b/d upwards adjustment to the November figure. The IEA estimates that throughput rose from 78.3mn b/d in October to 80.8mn b/d in November before dipping to 80.3mn b/d in December mostly because of a slowdown in Chinese activity.
"The global refining industry ended 2021 on a high note, with both processing rates and margins improving amid continuously tight product markets in 4Q21," the IEA said.
Global refining capacity contracted in 2021 for the first time in 30 years, falling by 730,000 b/d, the agency estimates. Almost 1.6mn b/d of capacity was closed or converted into biorefineries, while just 850,000 b/d of new capacity came online, it said. Europe is among the regions shedding the most capacity as its older refineries struggle to compete with Middle East and Asian counterparts on costs. Refineries in Portugal, Norway and Finland closed permanently in 2021.
The IEA forecasts refinery throughput in OECD Europe will average 11.4mn b/d in 2022, well below the 12.2mn b/d of 2019, reflecting the deep cuts to capacity in that region. It attributes the strong refining margins observed around the world in late 2021 partly to this cull in capacity and points to multi-year high refined product margins in Singapore and Europe at the end of the year.
European diesel prices hit a Covid-era high premium to the North Sea Dated crude benchmark in October last year, while jet fuel margins surpassed diesel on a per barrel basis for the first time during the pandemic in December. European gasoline premiums to crude reached a four-year high in November.
The refineries that fared best as 2021 went on were distillate-oriented and were located around Europe and Singapore, whereas gasoline-oriented refineries in the US faced deteriorating margins. Global refinery capacity is expected to rise by 1.2mn b/d in the coming year, which will help support growth in throughput.