New refineries won’t depress margins as previously suggested

  • New global refineries won’t depress margins for key products this year
  • Increased production from these projects will be delayed for several quarters or even years
  • Refining industry is about 3 million b/d shy of mid-cycle equilibrium
  • Refinery margins will remain supported until electric vehicle penetration rises significantly
  • Dangote refinery in Nigeria and Dos Bocas facility in Mexico won’t influence product markets until at least the first half of 2024
  • Goldman analysis suggests most new refineries can expect at least five more months than projected for equipment to come online
  • No units currently listed with ‘planned’ status will become operational until 2028
  • Long lags between investment and downstream returns, together with significant demand uncertainty, prevent ‘high prices from curing high prices’
  • Refining margins are likely to remain strong

Goldman Sachs has stated that new global refineries, such as the Dangote refinery in Nigeria and the Dos Bocas facility in Mexico, will not depress margins for key products this year. The investment bank’s analysis suggests that increased production from these projects will be delayed for several quarters or even years. Furthermore, the refining industry is currently about 3 million b/d shy of mid-cycle equilibrium, indicating that refinery margins will remain supported until electric vehicle penetration rises significantly. The Dangote and Dos Bocas refineries are not expected to influence product markets until at least the first half of 2024. Goldman’s analysis also reveals that most new refineries can expect delays of at least five months for equipment to come online, and no units currently listed with ‘planned’ status will become operational until 2028. Despite long lags between investment and downstream returns, as well as significant demand uncertainty, refining margins are likely to remain strong.

Public Companies: Goldman Sachs (N/A), Dangote (N/A), Dos Bocas (N/A), Pemex (N/A)
Private Companies:
Key People: Tom Kloza (Reporter), Jeff Barber (Editor)

Factuality Level: 8
Justification: The article provides analysis from Goldman Sachs and references specific data and examples to support its claims. It acknowledges media reports but counters them with evidence and expert analysis. The information provided is specific and detailed, giving the reader a clear understanding of the current state of global refineries and their impact on margins.

Noise Level: 8
Justification: The article provides a thoughtful analysis of the refining industry and the potential impact of new refineries on global margins. It challenges the headlines and press reports suggesting imminent production increases from the Dangote refinery in Nigeria and the Dos Bocas facility in Mexico. The analysis is based on Goldman Sachs’ equity research over the last 10 years and highlights the significant delays and challenges associated with newly commissioned equipment and greenfield facilities. The article also discusses the long lags between investment and downstream returns, as well as the demand uncertainty in the refining industry. Overall, the article provides valuable insights and challenges popular narratives.

Financial Relevance: Yes
Financial Markets Impacted: The article discusses the analysis by Goldman Sachs on the impact of new global refineries on product markets and refinery margins. This information is relevant to investors and companies in the oil and gas industry.

Presence of Extreme Event: No
Nature of Extreme Event: No
Impact Rating of the Extreme Event: No
Justification: The article does not mention any extreme events or their impact.

Reported publicly: www.marketwatch.com