•OPEC+ unexpectedly speeds up oil output hikes, oil price drops to $70

Emmanuel Addeh in Abuja

A total of 101 out of 410 refineries around the world are at risk of getting shut down over the next decade, Wood Mackenzie analysts have estimated, noting that this number represented 21 per cent of global refining capacity.

The reasons for this estimate include peak oil demand that would reduce demand for the output of refineries and high operating costs in places such as Europe, which collect carbon taxes from their energy industry.

Wood Mac said it considers the inflated operating costs of refineries an especially important risk factor for their future prospects, as well as their investments in decarbonisation, oilprice.com reported.

“Refineries without committed investments in low-carbon technologies, such as carbon capture, energy efficiency upgrades, or alternative fuels, are especially exposed,” the analysts wrote.

“Those located in regions with established or escalating carbon pricing costs, including the European Union, UK, and Canada, are under the greatest pressure,” the report added.

The carbon prices in these jurisdictions are scheduled to rise to three times above the global average by 2035, the analysts also noted, which will likely make the continuation of the life of some refineries in the EU, the UK, and Canada economically nonsensical—unless policies change.

Many observers have argued that China’s concerted electrification push and the diversification into LNG-powered trucks would kill a lot of oil demand. Indeed, consumption data suggests there has been an impact.

The refining and petrochemical facilities have the best chances of survival, according to Wood Mackenzie. This is because most forecasts for fuel demand, albeit based on policies that are not as immutable as most assume, see a drop in that over the medium term. Most forecasts for plastics, on the other hand, are rather brighter, regardless of climate policies.

If closures proceed as predicted, which is quite likely in the current political context in places such as Europe, the EU, and Canada, there is a risk of fuel shortages emerging, as reported by the U.S. Energy Information Administration in the March edition of its Short-Term Energy Outlook.

Meanwhile, eight Organisation of Petroleum Exporting Countries (OPEC+) countries unexpectedly agreed yesterday to advance their plan to phase out oil output cuts by increasing output by 411,000 barrels per day in May, a decision that prompted oil prices to extend earlier sharp losses.

Oil, which was already down over 4 per cent on U.S. President Donald Trump’s announcement of tariffs on trading partners, extended declines after OPEC updated its plans in a statement, with Brent crude dropping over 6 per cent to below $70 a barrel.

Eight members of OPEC+, which includes OPEC allies led by Russia, had been scheduled to raise output by 135,000 barrels per day in May as part of a plan to gradually unwind their most recent layer of output cuts.

But after a meeting of the eight countries held online on Thursday, the group announced it would boost output by 411,000 bpd in May. OPEC cited “continuing healthy market fundamentals and the positive market outlook.”

“This comprises the increment originally planned for May in addition to two monthly increments,” OPEC said in a statement referring to the volume. “The gradual increases may be paused or reversed subject to evolving market conditions,” it said.

The May hike is the next increment of a plan agreed by Russia, Saudi Arabia, UAE, Kuwait, Iraq, Algeria, Kazakhstan and Oman to gradually unwind their most recent output cut of 2.2 million bpd, which came into effect this month.

OPEC+ also has 3.65 million bpd of other output cuts in place until the end of next year to support the market. The total of 5.85 million bpd is equal to about 5.7 per cent of global supply.

​