U.S. Refiners Face New Challenges in 2025
01.14.2025 By Tank Terminals - NEWS

January 14, 2025 [Oil Price]- Declining refining margins, slowing global fuel demand growth, and uncertainty about tariffs under the incoming U.S. administration are expected to continue challenging American refiners this year, analysts reckon.

 

Following record refining margins and booming profits in 2022 and early 2023, the U.S. and global fuel markets started to normalize in the latter half of 2023 and refining margins began to ease from the record highs seen in the immediate aftermath of the Russian invasion of Ukraine.

For U.S. refiners, margins dipped last year.

The top American refiners reported consensus-beating profits for the third quarter of 2024, the latest available quarterly figures showed at the end of last year.

However, refining margins slumped to multi-year lows amid tepid fuel demand and increased global fuel supply.

The refining industry is witnessing the end of the supercycle of huge profits and record margins that began with the post-pandemic surge in demand and the war- and sanctions-related supply disruptions.

In 2024, a weaker Chinese economy and fuel consumption, a wave of new refining capacity in the Middle East and Africa, and underwhelming demand in developed economies depressed refining margins.

The refining gloom continued toward the end of last year, and last week, supermajor Exxon warned that it expects to book a weaker profit for the fourth quarter of 2024 due to lower refining margins.

The declining margins could combine with the trade policies of President-elect Donald Trump, who has threatened to impose tariffs on imports of all goods from Canada and Mexico.

In the case of import tariffs on Canadian and Mexican crude, U.S. refiners – large importers of both – would see their refining gains eroded further.

“Margins are going to be weak until we get a clear picture regarding the direction of economic growth and tariffs on Canada,” Tortoise Capital portfolio manager Rob Thummel told Reuters.

“It’ll be a challenging environment until then,” Thummel added.

Yet, the EIA expects falling refining capacity in America to slow the decline of U.S. refining margins. U.S. refining capacity is set to drop by 3% this year, the EIA says, with LyondellBasell’s Houston oil refinery closing, and the Los Angeles refinery of Phillips 66 scheduled for closure by the end of 2025.

TankTerminals.com is a market research platform with operational, infrastructural and contact details of more than +9,105 tank terminals and +5,000 production facilities worldwide.


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