Decarbonisation Technology - May 2024 Issue

European refiners need to shift from volume to value Now is the time to plan for the impact of the energy transition and establish how to secure value growth through diversification away from transport fuels

Alan Gelder Wood Mackenzie

Refining has enjoyed unprecedented profitability The low point of the global pandemic feels a long time ago for the refining sector. During early 2020, one-third of the global population was locked down to slow the spread of Covid-19. Oil demand collapsed by more than 20 million bpd, and refiners were hit hard. Global oil demand in 2024 continues to set records, with 2023 demand already above pre-pandemic levels. The only transport fuel still below 2019 levels is jet fuel, as the fuel efficiency improvements from newer planes are offsetting the return to pre-pandemic levels of passenger numbers. Geopolitical tensions are supporting refining margins, particularly in Atlantic Basin locations, as both the Russia/Ukraine conflict and the Red Sea disruption are making global trade of crude oil and refined products less efficient.

Figure 1 shows the historical weekly global gross refinery composite margin over the past five years. The bottom of the five-year range was set by the pandemic, with the top of the range set by 2022, when the Russia/Ukraine conflict spread fear of significant supply loss. Refining margins for 2023 were less skewed by geopolitical events. However, Q3 2023 margins were driven by a combination of low European distillate stocks, high maintenance in the Middle East and Asia, and a low distillate yield from European refiners, which were processing much larger volumes of light, US tight oil feedstocks. Refining margins in 2024 spiked in February in response to the Red Sea disruption, which caused a significant diversion of inter-regional trade through the much longer route around southern Africa rather than the Suez Canal. The impression that refining margins will remain above the five-year historical average



5-yr range 2023 2024 5-yr avg


5-yr range 2023 2024



5-yr avg 2025












1 4 7 10131619222528 3134374043464952 Week No. -4

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec -5

Figure 2 Ex-RVO global gross refinery composite margin – monthly forecast Source: Wood Mackenzie Product Markets Service Short Term

Figure 1 Ex-RVO weekly historical global gross refinery composite margin Source: Wood Mackenzie Product Markets Service Short Term


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