REFILE-Traders to gain control of Europe's fuel as refiners close-IEA
(Specifies attribution in headline)
By Peg Mackey and Simon Falush
LONDON May 14 (Reuters) - Oil trading houses are poised to gain more control of Europe's fuel supply as its refiners close, and the shutdowns could have a significant impact on prices and energy security, the West's energy agency said on Tuesday.
The International Energy Agency foresees a seismic shift in global refining as countries such as India and Saudi Arabia build new capacity.
The expansion of global refining capacity is likely to outpace growth in demand and in crude supply, which increases pressure on margins and puts plants in Europe at "particularly high risk of closure", the agency said in its semi-annual report on global oil supply and demand trends.
As more refiners shut down, opportunities will be created for trading houses.
High maintenance costs and declining margins have led in recent years to a consolidation in Europe's refining industry, including four closures in 2012, putting regional capacity at about 15 million barrels per day. So far this year, another three closures have already been announced, the IEA said.
"Increased European reliance on trading houses and third-party suppliers may also leave a growing share of European supply in the hands of market participants with a different set of incentives than those of refiners," the IEA said.
Trading houses Vitol and Gunvor bought three of five plants from doomed refinery group Petroplus last year. The two other refineries, Petit Couronne in France and Coryton in England, have closed.
"Whereas refiners have a clear interest in maximising production and plant utilisation, traders have a different mix of fixed assets, and their strategy and market behaviour thus tend to respond to other signals, such as arbitrage opportunities or market volatility," the agency said.
Refinery closures are likely to increase the continent's reliance on product imports and storage terminals - especially for jet fuel and gasoil - and lengthen the region's supply routes, the IEA said.
"It is increasingly tough to make money in the European refining sector. There is more value for trading houses, which have better options for how and when to place the oil," said Seth Kleinman, head of energy at Citigroup. "But that leaves a question mark over the reliability of supply."
Increasing reliance on imports could make the market more vulnerable to price fluctuations based on interregional trade deals, rather than just supply and demand.
The cost of long-haul transport also could result in higher spreads between prices in European markets and those in product exporting countries, and price differentials between low-demand and high-demand periods may widen to cover storage costs.
The North American oil supply revolution and the surge in non-OPEC demand are redrawing the global refining map, the IEA said.
Refiners are moving closer to the wellhead, and non-OECD markets and international products trade are growing. (editing by Jane Baird)
- Tweet this
- Share this
- Digg this
- Tesco accounting black hole deepens, chairman to step down |
- UPDATE 2-Tennis-WTA Finals women's singles round robin results
- Britain slams EU budget demand, others see 'molehills'
- Hungary plans new tax on Internet traffic, public calls for rally
- Doctor who worked in Africa first Ebola case in New York City |