Europe Refiners Face Bleak Year As Profits Dive
Several European oil refiners reported losses or big drops in profits in the fourth quarter on Thursday, underlining the challenges for the sector just days after Total said overcapacity would force it to shut a plant.
Romania's top refiner Petrom said on Thursday its underlying earnings fell 13%, Czech rival Unipetrol posted a loss, and the refining units of larger rivals OMV AG and Repsol took big hits from a collapse in refining margins.
OMV's refining and marketing chief Gerhard Roiss told a news conference there was a 25% refining overcapacity in Europe.
Poland's PKN, which owns 63% of Unipetrol, said refining margins dropped 70% year-on-year while Spain's Repsol said its margins were zero in the quarter, compared to $8.60 per barrel a year earlier.
Rising crude prices have eaten into margins as weak fuel demand due to the economic crisis make it hard to pass on price increases. A Reuters poll on Thursday showed expectations of future crude prices continue to rise, suggesting pressure on refining margins could continue.
Analysts have said new refineries starting up in Asia and the Middle East, and predictions of a long-term decline in European fuel use, due to energy efficiency and measure to fight global warming meant a meaningful recovery in margins was unlikely anytime soon.
"The downstream environment ... remained particularly challenging with no clear signs of recovery yet," OMV Chief Executive Wolfgang Ruttenstorfer said in a statement.
Petrom, majority owned by Austria's OMV, said it had cut runs at its Arpechim refinery in response to the "challenging" market conditions.
On Monday, Total said it would shut its Dunkirk refinery in response to the environment and analysts expect more closures. Analysts said the companies would struggle to return to strong profits growth without dealing with their downstream problems.
"Repsol's fundamentals will continue to be eclipsed by weak refining over the first quarter," an analyst at a Spanish bank said.
Unipetrol had a fourth-quarter net loss of 257 million crowns ($13.5 million), a touch wider than expected and its fifth straight quarterly loss but rising crude prices, which boost inventory values, meant the loss was less than the 1.2 billion crowns reported in the last quarter of 2008.
Portuguese oil refiner Galp Energia said underlying net profit, which excludes unrealized gains related to change in the value of inventories, fell 73% to €34 million and missed analysts' forecasts.
