Wood Mackenzie predicts ‘high volatility’ 2020 for refining sector

The refining industry is set for a turbulent year as global influences combine to create a volatile environment, according to the latest industry snapshot by Wood Mackenzie.

Scotland's only crude oil refinery is located at Grangemouth. Picture: John Devlin

The Edinburgh-headquartered consultancy said factors including geopolitical risk, slowing tight oil production in the US and new International Maritime Organisation (IMO) regulations have meant a bumpy start to 2020, which could continue throughout the year.

Refining margins in the last few months of 2019 were also weak, especially in Europe and Asia where many were below historical five-year lows.

Alan Gelder, vice president of refining and chemicals at Wood Mackenzie – also known as WoodMac – said the transition of the shipping sector to newly introduced IMO rules was a “disappointment”.

Alan Gelder, vice president of refining and chemicals at Wood Mackenzie. Picture: Contributed

High sulphur fuel oil prices collapsed in October and November, as ship owners stopped buying this as bunker fuel and transitioned to very low sulphur compliant fuels.

Gelder said the US will also play a pivotal role in many of the key changes for 2020, supporting stronger global economic growth and higher oil demand.

He added: “We will find out in the coming weeks as to how much more marine gas oil is required by the shipping sector and this will determine how much better refining margins are in 2020. The outlook will, however, be masked by high volatility.”