Chinese refineries overtake Europe in lopsided recovery: IEA

Quantum Commodity Intelligence - A lopsided recovery in global refinery runs from the Covid pandemic will lay bare the shifting oil fundamentals from west to east, and in particular, from Europe to China, finds the International Energy Agency on Tuesday in the July edition of its Oil Market Report.

Global refining crude runs will ramp up another 2.2 million bpd in July, outstripping the 1.6 million bpd gain in June, but runs will continue to fall short of pre-pandemic levels until 2022 in North America and Europe.

But east of Suez crude throughput will reach a new record level at almost 39 million bpd in 2022.

The gap with the Atlantic basin will shrink to just 3 million b/d from 5 million bpd before the pandemic struck.

"One of the major manifestations of this shift is China overtaking the European continent in terms of annual average throughput rates," the IEA noted.

"After reaching parity in 2019, China's lead is forecast to widen to 3 million bpd in 2022 as European activity is not expected to recover to pre-pandemic levels."

Chinese refinery crude throughput will reach 14.4 million bpd next year, up 1.4 million bpd from 2019, while Europe will fall to 11.3 million bpd, down 1.4 million bpd from 2019. 

Outside China, refinery fortunes are mixed in Asia, the IEA added, and only countries with capacity additions, such as Malaysia and Brunei, will see refining throughputs surpassing pre-pandemic levels in 2022, while the rest will take longer to recover fully.

Meanwhile, the Middle East and Latin America are also on track to surpass 2018 levels for refinery runs in 2022.  

But North America and Europe will continue to see deficits, adding to pressure for more rationalisation.

The global month-on-month increase in July will take worldwide refinery crude throughput to 79.9 million, according to the IEA. 

Runs will peak at 80.4 million in August before slipping back amid maintenance to average 79.7 million b/d.  

But fourth-quarter crude runs will still be 2.6 million bpd lower than the pre-pandemic peak seen in 2018.