13 Nov 2020 Featured in: Market Watch - Issue 10

Research Highlights - Week 46

A successful vaccine and further consolidation may lay the basis for a strong rebound in margins next year (see Market Watch – Issue 10)

  • Global refining economics have been weighed down in 2020 by refinery overcapacity following the demand destruction caused by the COVID-19 pandemic. New demand disruptions, particularly in the West of Suez, are compounding on the consolidation dynamics we have been seeing throughout the year.

  • The 1.8 million b/d we currently track as confirmed closures earmarked for 2020-2023 is still far from the 3-4 million b/d of shutdowns and new project cancellations we view as necessary before we can see a return to sustainably higher margins.

  • With several vaccine candidates now undergoing phase 3 clinical trials, hopes are high that their deployment will contribute to recovering demand already in H1-2021. This, together with further refinery consolidation, might see a bullish margin environment emerging in the latter part of next year.