With distillate margins having risen over the past month and gasoline still strong, European refineries may look to delay scheduled autumn maintenance programs until January, where possible.
"European refiners are not flexible with their maintenance programs. You have to book [contractors] 6-8 months forward," one trader said.
"Some refineries have their own maintenance crews and have the flexibility to do it when they want, but that is maybe only about 5%."
A report from BNP Paribas Monday showed cracking margins for Brent crude in Northwest Europe averaged $7.81/b in the week to last Friday, up from a $6.52/b in the week to July 24 as steep price falls in the crude complex have outpaced falls in refined product markets.
"I heard that talk [about delaying maintenance] a couple weeks ago...most refineries are hedged until the end of the year, so I think people are trying to delay maintenance until January from the typical October/November turnarounds," a trader said.
"[It] makes sense because in January there is not huge demand. Whether everyone can do it, I do not know. The maintenance program this fall is smaller this year than last, and last year smaller than the year before."
Consultancy Energy Aspects, in a recent report, placed offline CDU capacity at 330,000 b/d for both September and October.
That compared with 990,000 b/d of distillation capacity taken offline in September last year and and 1.07 million b/d down in October 2014.
"Owning to the strong margins, it [autumn maintenance] looks to be lower than seasonal...at the start of this year margins were very strong, so it is questionable how fast refineries can now react," a third trader said.
HEALTHY MARGINS SET TO STAY FOR A WHILE
Refineries have been pushing back maintenance this year, in an attempt to take advantage of margins that surged from the lows of early 2014 and 2013.
Italian refiner Saras deferred second-quarter maintenance, and will try to keep works limited in the third and fourth quarters, it said recently.
Cepsa also said recently it was to delay until January works at Huelva previously planned for November and also partial works at San Roque to November from October.
Other refineries in the Mediterranean, including BP's Castellon, Eni's Sannazzaro, ExxonMobil's Augusta, and Motor Oil's Corinth were expected to carry out works in September or October.
Russian refineries will also likely carry out works this autumn to avoid the cold winter months.
But, overall, the maintenance outlook for the rest of the year remained sparse -- as Israel's Paz Oil said recently, margins were expected to improve further in the third quarter due to lower crude prices.
Analysts also expected the healthy margins, which refineries have been enjoying since the second half of last year, to persist.
Energy consultancy Wood Mackenzie's latest long-term oil product market forecast said the outlook for 2016 "remains similar and in many ways stable".
Refineries have benefited from low oil prices, outages in Latin America, and slower than expected ramp-up of new facilities in the Middle East, Wood Mac said.
Gasoline has been the leading force behind the strength, with refineries "struggling to meet gasoline demand growth of approximately 420,000 b/d", Wood Mac said.
Demand into the US and Persian Gulf and better than expected Asian demand pushed the gasoline crack to record highs in July, when it peaked at $30.90/b.
While it was assessed down at $18.47/b this week, it remained well above the $3.33/b seen at the start of the year and $9.50/mt in May 2014.
Spot cracking margins versus Dated Brent for jet and diesel barges in Northwest Europe were seen at $14.21/b and $15.12/b, respectively, on Tuesday, up from an average of $10.47/b and $12.27/b for the week ending July 24.
According to Wood Mackenzie's short-term outlook for jet fuel, cracks were expected to strengthen in 2016 due to rising global demand.
The strong margins had also put off any imminent refinery closures in Europe. Total is now likely to run its La Mede refinery until 2017, when it plans to transform it into a biodiesel plant.
Elsewhere, the latest refinery to close, Tamoil's Collombey in Switzerland, appeared to be attracting buying interest. "There have been some preliminary contacts with third parties," a company source said last week.
Meanwhile, KPC's Europoort refinery in Rotterdam, up for sale since the start of the year, continues to operate, with no new developments reported.
According to Wood Mac, the good times may last until 2017, when "a surplus of gasoline is expected to flood the market".
But, until then, those who can are likely to continue working at full force, deferring maintenance or closure.
"People are going to maximize the time operating under good margins," a trader said.