Refiners Expected To Cut Runs As Hedgable Economics Drive Decisions -- Rystad Energy
KUALA LUMPUR, April 3 (Bernama) -- Refiners are expected to reduce operating runs as decisions are driven by hedgable economics rather than directional market views, said independent research and energy intelligence company Rystad Energy.
Its chief oil analyst, Paola Rodriguez-Masiu, said while nothing appears structurally broken for refiners on paper, conditions on the ground point to a strained Asian refining market scrambling for additional barrels.
“The forward curve is telling them to ‘run’, but the arithmetic of crude calculated on a landed basis at the refinery wipes out the screen margin completely.
“As refineries do not operate on directional views but on hedgable economics, the rational response, the only financially defensible response, is to cut runs,” she said.
She noted that European second-quarter 2026 refinery margins are holding at around US$30 per barrel for hydrocracking and coking configurations, and about US$20 per barrel for fluid catalytic cracking, with a relatively flat forward structure.
However, in the physical market, West African grades are being offered at Brent plus US$20 to US$30 per barrel on a free-on-board basis.
“From the Niger Delta to Brazil, every available replacement barrel is being offered at levels that effectively consume the entire forward refining margin before the crude even arrives.
“Asian refiners, shut out of Middle Eastern supply, are bidding aggressively for every available Atlantic Basin barrel,” she said.
Rodriguez-Masiu added that European and South Korean refiners are now competing for the same Egina cargo, Forcados lifting, and Brazilian Tupi crude.
At current physical differentials and freight rates, European refiners buying spot crude cannot make money running those barrels.
“The core issue is simple: the financial market is not just lagging the physical market; it is making the supply crisis structurally worse, and the refiners that are being forced to cut runs today will not be able to restart overnight when the signal finally arrives.
“Restarting capacity is neither immediate nor frictionless,” she added.
-- BERNAMA