Global Downstream Outlook
Energy Insights Outlook Overview

Global Downstream Outlook to 2030

Will the positive outlook for refining markets remain to 2030?

How will global and regional refining markets evolve as we approach 2030? To find out, we have examined the Asian, European, and North American downstream markets and explored likely developments in refining utilization, crude and products balances, and trade flows to 2030.
Based on data and insights from our Global Downstream Model and OilDesk, our global downstream outlook outlines recent trends in global refining and presents an outlook for fundamentals and margins.

Five key findings

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Executive Summary

Recent market trends

To date, 2018 has seen strong refining-market conditions and high margins, due in large part to a broad global economic recovery and modest growth in refining-capacity additions last year. Global demand growth in 2017 exceeded market expectations, with added 1.6 million barrels per day of product demand, as strong economic growth in China, Europe, and the United States spurred additional growth in diesel and gasoil demand.

In the first half of this year, robust economic conditions and a cold winter season kept demand firm, while modest capacity growth and unplanned outages in Europe, Mexico, and the United States helped keep supply tight. As a result of that tighter market balance, refining margins in the three main hubs were set by simple capacity at breakeven.

Utilization in the NW European hub market returned to 86 percent, a level not seen since 2006, and even margins for simple refining capacity were above breakeven for most of 2017 and through the first half of 2018. US Gulf Coast refiners also ran flat out to meet demand in export markets. Margins continued to be set at netback pricing to export markets, while cheap and available local crudes in the United States also boosted margins. In Asia, utilization and margins benefited from strong product-demand growth, and topping margins in Northeast Asia were positive for most of the second half of 2017.

Market outlook

Through 2020, our outlook for global refining markets is positive. We expect to see demand remain strong through the start of 2020, with an average annual increase in global demand of 1.3 percent. Refining-capacity additions will also accelerate, especially in Asia. When the bulk of new capacity additions comes online in 2019, we might see a slight decrease in global refining utilization and margins as global product supply is disrupted. In 2020, the implementation of the International Maritime Organization’s MARPOL regulation will increase global refining utilization, tighten distillate markets, and widen light–heavy differentials, bringing the potential for a very sharp improvement in margins, especially for high-conversion refiners.

In the medium to long term, new technologies and changing consumer behavior will create a challenging environment for refiners. Most significantly, increasing fuel efficiency and the growing electrification of passenger vehicles will lead transport-fuel demand to peak in the late 2020s, as outlined in our reference case. The deceleration and eventual decline in demand is expected to put pressure on global utilization and margins after 2025, with the biggest impact seen in Europe.

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