Falling demand and rising refinery maintenance are expected to trim global refinery output in the second quarter, The International Energy Agency forecast Friday.
In its widely watched monthly oil report, the energy watchdog for the Organization for Economic Cooperation and Development forecast global refinery runs would reach 73.7 million barrels a day in the second quarter, compared with its previous forecast of 73.9 million barrels a day. The downward revision reflects "a mixture of lower demand forecasts and higher maintenance estimates in some regions, notably China and the FSU (former Soviet Union)," the IEA said.
But the slowdown in second quarter refining activity would be partially offset by the restart of two Nigerian refineries and lower estimates for Japanese refinery maintenance.
April refinery runs are seen reaching 73 million barrels a day, compared with 73.3 million barrels a day in March, the IEA said.
Looking forward, the agency expected refiners to take advantage of a recent bounce in refining margins.
"The recovery in gasoline cracks in late March and early April further bolstered already strong complex refining margins, suggesting that cracking refineries in Europe and Asia will maximize runs where possible," the IEA said.
It also forecast European middle distillate margins would stay buoyant, in contrast to sluggish first quarter margins for fuel oil and gasoline.
"(Middle distillate cracks) have been supported by the continued strength of demand for diesel and the tighter sulfur specifications for heating oil in Europe," the agency said.
Meanwhile, U.S. gasoline output could be constrained in the second quarter as the switch to summer-grade gasoline narrows the refiners' pool of gasoline blending components.
"Ultimately this could...support margins over the summer months and lead to increased imports of low volatility gasoline blending components."
In terms of demand, the agency said China would need a high level of imports in the second quarter to satisfy robust demand and counteract refinery maintenance.
"We expect that (China) is likely to necessitate increased imports of gasoil, jet and gasoline over the coming months," the IEA said.
High gasoline stocks in the U.S. and Europe damped first quarter refining margins, but discretionary run cuts and seasonal refinery maintenance have helped margins to bounce back in recent weeks.
"Refining activity remained weak in OECD regions during March, compared with seasonal norms, as the poor margin environment continued to deter refiners from maximizing crude runs," the IEA said.
"North American refineries were particularly hard hit, but reports suggest that economic run cuts affected crude runs in OECD Europe and the Pacific and in some non-OECD Asia countries," the agency added.