Europe’s IMO Vulnerable Refining Capacity

Europe has at least 1.2 million b/d of refining capacity that are at greater risk from new IMO specifications.  These refineries’ high yields of heavy fuel oil, smaller and less-efficient size, and lack of plans to invest in upgrading make them vulnerable to weaker demand for heavy fuel oil and widening spreads once IMO changes take effect. Other bigger refineries are investing to adapt to market changes and remain viable.

Has OPEC Risen to the Challenge?

The decision by Saudi Arabia, Russia and ostensibly the rest of OPEC to extend the production cut through the first quarter of 2018 is not a surprise, except for the addition of the first quarter of 2018. Extending through early 2018 signals that the producers understand the magnitude of the challenge. Whether they rise to the challenge depends on their success this summer. OPEC needs to do as much as possible now to temper the surplus coming in the first quarter.