EMEA News
EU Fuel Oil Market "in Decline"
Falling global demand for fuel oil is forcing European refiners to choose between closing down and making upgrades to produce more expensive fuel types, Platts reports.
"Most refineries have a view that the fuel oil market is in decline and it will be increasingly difficult to make money when you produce large amounts," said Robert Campbell, head of oil products research at Energy Aspects.
Contributing to the shift in demand are stricter environmental regulations on sulfur content in bunker fuels, which will reduce the market for residual oil and make highly refined products more valuable.
"The fuel oil crack spread will remain weak and diesel will remain relatively strong," said Jonathan Leitch, principal analyst with Wood Mackenzie.
In recent months, ExxonMobil has announced major upgrades to refineries in Antwerp and Norway, reducing heavy fuel oil production and increasing output of products like diesel and vacuum gasoil.
Total is also upgrading its Antwerp refinery, and a Netherlands refinery owned by Total and Lukoil completed a hydrocracker upgrade this summer.
Other upgrade projects are also in the pipeline in Russia, Eastern Europe, and Turkey.
Traders and analysts said the upgrades are not likely to create a fuel oil shortage, noting that Russian fuel oil has continued to flow despite upgrades that have already been made to the nation's refineries.
ExxonMobil has said its Norway upgrade project will improve the refinery's energy efficiency and help the company's competitive position.
