1. Gasoline demand rebounds, jet fuel stays down
- In the U.S., demand for petroleum products plunged by 7 mb/d between March and April.
- Since then, demand has bounced back by 4 mb/d, according to Bank of America Merrill Lynch. Refiners initially shifted production mixes to relatively more diesel and less gasoline.
- But because the rebound is concentrated in gasoline, as millions of people returned to driving and shunned mass transit, refiners will have to switch back.
- “This surge in demand, coupled with aforementioned yield shifts have helped contain gasoline inventory builds in recent weeks, although they remain stubbornly high compared the seasonal five year historical range,” Bank of America said.
2. Refiners squeezed by new facilities
- A wave of “mega refineries” are set to come online over the next four years, mostly in China and the Middle East. This comes despite the fact that oil demand will not return to pre-pandemic levels until at least 2022, according to Goldman Sachs.
- The new capacity will lower overall refinery utilization worldwide by 3 percent.
- Thinner margins and stiff competition could force the shutdown of refineries in developed countries, Goldman warns.
- Gasoline fares much better than distillates, with passenger vehicle traffic returning quickly while jet fuel demand remains badly damaged.
3. Major write-downs increase scrutiny on majors