Surplus jet will force European refiners to keep a lid on crude runs, warns FGE

Quantum Commodity Intelligence - European refineries will have to keep a lid on their crude runs because of the lacklustre recovery in aviation demand, warns FGE Energy consultancy, according to Reuters.

FGE sees jet and kerosene demand in Europe reaching 75% of 2019 levels by the end of 2022, meaning refiners will have to keep blending surplus jet barrels into the diesel pool.

"Such blending tends to limit overall refinery crude throughput because maximum distillate hydrotreating capacity is reached at lower crude throughputs," FGE said.

"At this point, incremental crude runs would produce only naphtha, high sulfur gasoil and fuel oil – not a recipe for positive margins."

"The more jet that can be pulled out of the diesel pool (thus freeing-up diesel hydrotreating capacity) the more scope there is for refineries to increase throughput."

FGE thinks European jet demand will be very close to pre-pandemic levels by 2024, although full recovery will take several years.

The ongoing rationalisation of the European refining sector will shrink capacity by 700,000 bpd in 2020 and 2021, while hydrotreating, which strips out sulfur, will drop by 200,000 bpd, according to the consultancy.

Average crude run levels will drop from 12.5 million bpd before the Covid crisis to 11.1 million bpd this year and then 11.7 million bpd next year.