In its latest long-term outlook, OPEC said the coronavirus pandemic will slow the pace of refinery expansions, but the market will still see significant overcapacity in the years ahead.
It expects about 3.8 million b/d of new refining capacity to come online by 2022, it said in its World Oil Outlook.
While that growth will slow down significantly after that, the market will not require that much capacity, OPEC said, with about 2.5 million b/d of refinery closures expected by 2025, mostly in Europe, the US and Canada.
From 2025 to 2045, another 6 million b/d of refinery capacity will be shuttered to keep utilisation rates at sustainable rates of around 80 percent.
OPEC analyst Haris Aliefendic said: “We do see a necessity for closures in the medium term, but also in the long-term. We will see some kind of consolidation wave, similar to what we saw from 2012 to 2016 or 2017.”
COVID-19 caused refinery utilisation rates to hit record lows in the first half of 2020 and the continuing slump in demand has caused a build-up of refined product stocks. OPEC estimated in the outlook that global oil demand could peak in 2040 at 109.3 million b/d, before declining gradually in the subsequent years.
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