Fuel markets, especially those of diesel and kerosene, may continue to be very tight amid uneven global demand growth rates and limits in the refining capacity, the International Energy Agency (IEA) said on Wednesday.
After the maintenance season at refineries across the U.S., Europe, and Asia ends, refining activity is set for a solid recovery across the board as demand is robust with the summer travel season, the IEA said in its Oil Market Report for June.
Refining capacity globally is also set to increase this year and next, but not fully offsetting the capacity that has been shut down since the start of the pandemic.
Global refining capacity is expected to rise by 1 million barrels per day (bpd) in 2022 and another 1.6 million bpd in 2023, but product markets will remain tight amid uneven paces of recovery in various regions, the IEA said in its first outlook for the oil market in 2023.
Refinery runs will jump by 3.5 million bpd from May through August 2022, and by 2.3 million bpd for this year on average. Another 1.9 million bpd increase in refinery runs is forecast for 2023, thanks to new refinery start-ups in Africa, the Middle East, and Asia, the IEA added.
"However, shortages in individual products may well persist due to uneven rates of demand growth and limits in the refining system. Diesel and kerosene supplies remain of particular concern," the agency said.
The IEA's estimate that higher refinery runs will not lead to a balance on the fuel markets comes on the day on which U.S. President Joe Biden told oil companies in a letter to produce more gasoline and lower gasoline bills for American consumers.
"At a time of war, refinery profit margins well above normal being passed directly onto American families are not acceptable," President Biden wrote in a letter to companies including ExxonMobil, Valero Energy, and Marathon Petroleum, seen by Reuters.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More