An international report confirmed that the refining industry in Asia and its counterpart in the Middle East would witness a state of competition that would accelerate the efforts of continuous development in the coming years. It is especially that many crude oil companies in the Middle East are seeking strategic partnerships with Asian refineries.
The report, issued by the "World Refining Association" or the International Refining Association, added, "This gives companies in the Middle East a good opportunity to increase their market share, especially refined products in Asia. It could be done through these selected partnerships, while at the same time allowing a significant outlet for crude of the Middle East. "
The report said that there are many cases where such partnerships are concluded. However, at the same time, there is continuous competition between refineries of the Middle East and its Asian counterpart. It expected that the market would see in the future strategic alliances in light of the ongoing competition between refineries from both regions.
The report of the International Association noted that the ongoing challenge facing Asian refineries is to manage profitability in an increasingly complex and volatile environment. It pointed out that the refineries are currently witnessing high costs of inputs of crude oil, which causes pressure on the prices of refined products in addition to the existence of excessive energy consumption.
Furthermore, the report of the International Refining Association emphasized that the agreement of the Organization of Petroleum Exporting Countries "OPEC" with partners from outside makes the prices of crude oil to move up at an accelerated pace, especially in the Asian markets because of the shrinking supply of the Organization.
The report noted that, in addition to the pressures of high crude oil prices, there are other pressures on the market represented by excess capacity in the products produced by China, India, and the Middle East. This means that refineries will be under constant pressure to keep prices low for their products.
According to the report, the Asian refineries benefited greatly from the decline in oil prices in 2015 and 2016, which enabled them to maintain continuity and survive the closure last year because of the lack of production in general in 2017.
On refinery growth prospects this year, the International Refining Association (IRC) said that global demand growth prospects remain strong. It pointed out that Asia is firmly and steadily driving most of the world's economic growth rate.
The report mentioned that refineries need to redouble their efforts and increase the concentration of their production in order to work to meet the demand growth comfortably. It noted that refineries should play a key role in benefiting from the current changes in the domestic demand trends as well as diversifying working methods to reduce production costs.
According to the report, refineries will also need to focus on increasing investments in technology. It stressed the importance of increasing the pressure on refineries to be more environmentally conscious, especially in the field of resource management such as water or respond to the low needs of the presence of sulfur component in order to reach the quality level in the transport sector.
On the continuing growth of renewable energy and alternative fuels and its impact on refining activities in Asia, the report says that many companies are focusing on increasing reliance on renewable fuels and are developing special technologies to do so. The report mentioned that renewable fuels could have a larger share of the market than is currently being done, but it is unlikely to exceed conventional fuels any time soon. It is a long-term vision. It stressed that there must be a good way to meet market demand growth through renewable resources and sources.
The report noted the existence of important experiments for the production of renewable fuels in the United States and Brazil, especially the production of ethanol from corn and sugarcane respectively. It stressed the importance of controlling the costs of energy production and improving efficiency, especially for the global refineries and petrochemical producers.
It pointed out that the issue of energy efficiency is of great importance and focus, especially in Asia and Europe, where the energy costs are relatively high in the two continents. It considered that reducing the use of energy would have a positive impact in the margins and would help at the same time to reduce the negative impact in the environment through reducing emissions. Therefore, improvements in energy efficiency should be pursued.
The report emphasized that producers must work seriously to improve their operations and better planning for maintenance activities and focus on achieving the highest levels of operational excellence. It added that there is also a need to adapt the production processes to be compatible with the requirements of the market, identify the needs and opportunities, and make investments appropriate.
The report said that demand can only be met through continued investment in the production of fuel and petrochemicals efficiently, and through working simultaneously at the same time to reduce emissions and to make the refineries perform better continuously. This would allow them to be more profitable in the long run as the producers can handle market cycles in a better way.
In a related context, the report of "World Oil" mentioned that the US Gulf Coast refineries, which rely on heavy oil, bear heavy burdens and pay for the shrinking of production of Venezuelan crude oil, which relied heavily on it.
The report pointed out that the US production is currently at its highest level ever. Regarding the crude production in Latin America, it is generally declining due to sharp contraction in the supply of Venezuelan oil, which reached the lowest level recently (although it recorded a modest increase in January).
The US Gulf Coast refineries rely heavily on heavy Venezuelan oil at between 40 percent and 60 percent, which makes the Venezuelan production collapses a heavy burden on the US refineries in the region, the report said.
The report pointed out that the oil market in North and South America is under the various pressures. It is because of the rise in the US production, which puts pressure on the WTI price. Also, it is due to the continued decline in Venezuelan output, which weakens supplies of heavy oil and ignites prices, because of the inability to meet demand needs, especially at the local level.
Oil prices rose at the end of last week as Wall Street stocks recovered from a low session. However, the benchmark crude contracts posted the first weekly drop in three weeks on concerns that the US plans to impose tariffs on steel and aluminum importation, which could put pressure on economic growth and concern about growing crude production in the United States.
In Thursday's session, oil followed the stock market's downward trend after the US President, Donald Trump, said that he would impose "large tariffs on steel and aluminum importation to protect the US producers." Therefore, investors fear the move could trigger a trade war.
Oil fell with equity markets in early trading, but oil recovered with the Standard & Poor's 500. NASDAQ Composite Index was reversing their losses and turning them up.
According to Reuters, the world's benchmark Brent crude futures closed 54 cents higher, 0.9 percent, to settle at $ 64.37 per barrel. While the US WTI crude contract rose 26 cents, 0.4 percent, to close at 61.25 dollars per barrel. The benchmark crude ended the week with losses as Brent fell nearly 4 percent and US crude fell more than 3 percent.
The US energy companies added oil refineries for a sixth week in a row as crude prices remained near three-year highs. It prompts more oil drilling companies to increase their spending plans for 2018.
Baker Hughes Energy Services, in its closely monitored report, said that drilling companies added one excavator in the week ending March 2, which brings the total number of excavators to 800; the highest level since April 2015.