BAKU, Azerbaijan, Dec.16. The EU ban on Russian fuel products effective from February 2023 will cause diesel cracks, Trend reports with reference to Fitch Ratings.
“Refining margins remained high throughout 2022 due to tight supply resulting from Russian invasion of Ukraine. Gasoline cracks retreated recently on seasonally lower demand, but diesel cracks remained high due to still tight supply. Europe has historically imported around 20% of diesel from Russia, but is set to ban imports of fuel products from February 2023. This will support diesel cracks in the short term, but we expect the market to gradually balance with imports from other sources,” reads the latest report from Fitch Ratings.
The rating agency expects global net refining capacity to expand in 2022 and 2023, following two years of net capacity closures due to the pandemic-driven historical slump in refining margins.
“We believe some of the large projects expected to come on stream may be delayed and add to production only in the second half of 2023, effectively putting pressure on margins in 2024. However, a recessionary pressure on demand coupled with faster-than-expected capacity growth is a downside risk to refining margins in 2023.
Higher oil and gas prices and healthy refining margins, albeit lower than in 2022, should support the credit profiles of European medium-sized integrated companies in 2023. Petrochemical segments may suffer due to higher feedstock prices and lower demand on recessionary pressures. We expect European medium integrated companies to continue to adjust their strategies to the changing market dynamics with higher spending for renewable investments, shift to petrochemicals and new mobility and hydrogen production,” the report says.
---
Follow the author on Twitter: @Lyaman_Zeyn