Spotlight: China makes unprecedented cut in refinery runs to offset colossal demand decline

The coronavirus outbreak has now started to spread outside China, while the peak appears to have been reached in China. Economic activity is certainly slowing with regional recession risks increasing.

Overall refinery runs during February are now estimated to be cutback by around 2.9 MMB/D from the prior year in China. This takes the form of both run cuts and planned maintenance related turnarounds. The focus below is on outages, both planned and unplanned. The weak demand related downtime is in addition to this.

Global CDU outages for the week ending March 13 are expected decrease to 7.69 MMB/D compared to the recent peak of 8.39 MMB/D recorded for the previous week. The outage level came in higher than our forecast of 7.73 MMB/D for the week ending March 6 due to delays in restarts in the U.S. and the addition of Rabigh refinery shutdown in Saudi Arabia.

US: Outage levels in the U.S. remained largely unchanged at 1.73 MMB/D from the previous week's 1.78 MMB/D as Exxon Mobil's Baton Rouge remained shut. Indications are that the Baton Rouge CDUs will restart in the coming days. Maintenance at HFC's Tulsa refinery and MAP's Los Angeles refinery will end this week while the outage at Shell's Convent and PBF's Toledo, are expected to continue. We expect to see total outages drop to 920 MB/D in the U.S. for the week ending March 13th as more maintenance concludes, including the key restart at Baton Rouge. As always, there is still some upside for potential unplanned events.

Middle East: The regional CDU outage increased to 970 MB/D for the week ending March 6 as we identified Petro Rabigh beginning its planned maintenance from March 1. This outage is planned to last about 60 days. We expect to see the regional outages soften slightly to 920 MB/D for the week ending March 13, as the maintenance work in Al Jubail (Saudi Arabia) should be restarting in the coming days.

Asia: The regional CDU outage total was slightly revised down to 2.07 MMB/D for the week ending March 6, ~170 MB/D lower than last week's forecast. We confirmed that Zhenhai refinery did not shutdown amid the Coronavirus outbreak and removing this resulted in lower downtime. We also identified that Lianmeng refinery (40 MB/D) has restarted, and some positive news may be on the way from some of the refineries in Shandong. The regional outage will reduce to 2.05 MMB/D for the week ending March 13 as a few refineries restart, though there are still some uncertainties. As we noted in our recent GRO report, our latest data suggests about 2.9 MMB/D y-o-y reduced runs for February from the virus effects that includes both maintenance and discretionary run cuts. 

NWE/MED: Refinery outages for the week ending Feb 28 averaged close to 500 MB/D, which is 90 MB/D higher than the previous week. This trend will continue at an accelerated rate going forward. Newly announced turnarounds along with some major unplanned outages will bring average downtime to 960 MB/D for the week ending March 6. Milazzo's 111 MB/D CDU#4 and Total's Grandpuits 102 MB/D CDU#2 were both shut down suddenly on March 2. Besides these unplanned events, planned turnarounds began at Gunvor's 84 MB/D Europoort refinery and Ineos' Lavera 207 MB/D refinery. Ongoing maintenance continues at Total's Feyzin 109 MB/D refinery and the fire-damaged 286 MB/D CDU at Total's Gonfreville refinery. Outages for the week ending March 13 are expected to increase further to around 1100 MB/D as new planned turnarounds begin to emerge heading into the spring season.

FSU: With identified regional outages growing to 270 MB/D for the week ending March 6, the first week of March marks the beginning of turnaround season in the FSU, consistent with last week's forecast. This represents a 100 MB/D increase from previous week. However, regional turnarounds are still expected to be relatively light for the month of March compared to recent history. New turnarounds on some crude distillation units at 180 MB/D Antipinsky, 258 MB/D Volgograd and 185 MB/D Ufaneftekhim join existing outages at 120 MB/D Afipsky and 170 MB/D Syzran. The following week will see another 65 MB/D increase in outages, with ~340 MB/D expected offline in the week ending March 13.

Latin America: Regional outages of 1.68 MB/D for the week ending March 6 represent a 165 MB/D increase versus previous week's forecast. The increase is due to an outage at Petroecuador's 165 MB/D Cartagena refinery. According to the latest Platts information, the refinery has been offline since mid-January due supply issues, and will remain offline through April. Elsewhere in the region, unplanned outages at all but one of PDVSA refineries are ongoing, and the 945 MB/D Paraguana Refining Center continues to operate at a maximum of 20% of its capacity. Planned works pertaining to the upgrade of Petroperu's 62 MB/D Talara continue, as well as other maintenance events in some Mexican refineries. Thus, regional outages for the week ending March 6 are expected to remain flat w-o-w at 1.68 MMB/D.

Africa: There have been no new developments pertaining to refining operations in the region since last week's spotlight. Therefore, regional outages for the next few weeks are expected to remain around 720 MB/D. Libya's 110 Mb/D Az Zawiya remains offline due to blockades at the supplying Sharara oilfield, which has seen no movement towards resolution since last week. South Africa's 110 MB/D Caltex remains offline for planned maintenance. Lastly, prolonged unplanned outages continue at NNPC's refineries, Ghana's 41 MB/D Tema facility and Cameroon's 77 MB/D Limbe site.

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