London, 15 October (Argus) — Total’s European refining margin slipped into negative territory in July-September, the latest in a series of depressed third-quarter indicators. The outlook for the regional sector remains gloomy.

Total’s margin was -$2.70/t (-$0.37/bl) in the third quarter, compared with $14.30/t in the second quarter and $47.40/t a year earlier.

It follows similar indications from Spanish integrated Repsol and Portugal’s integrated Galp, whose refining margins also turned negative during the quarter. BP’s global refining marker margin (RMM) picked up in July-September, but remained substantially below levels from a year earlier, and its margins were worst in Europe.

The Covid-19 pandemic has upended traditional value streams for European refiners, prompting many to maintain rates at minimal levels or cut runs. Already this month, Spanish integrated Cepsa and Galp have mothballed units, and Shell will undertake maintenance at its 420,000 b/d Pernis plant, the largest in Europe, although it is unclear if this is influenced by the poor margins.

But low returns are aggravating the challenge of overcapacity that has faced the global refining sector for years, the IEA said in its latest Oil Market Report (OMR) this week, adding that the outlook for many refiners was “bleak”.

The IEA expects global fourth-quarter throughput to reach 75.8mn b/d, up by 2.1mn b/d on the quarter but down from its previous fourth-quarter projection of 76.1mn b/d. It sees global refinery throughput rebounding by 4.9mn b/d next year, just over two thirds of the 7.2mn b/d lost in 2020 and erasing all the growth that has occurred since 2015.

The outlook remains fragile. The rising trajectory of Covid-19 infections is tightening the movement of citizens in many countries, raising doubts over the “robustness” of economic recovery and oil demand growth, the IEA said.

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