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McKinsey publishes global downstream outlook to 2035 report

Published by , Senior Editor
Hydrocarbon Engineering,

McKinsey & Company has announced the release of its global downstream outlook to 2035, which is based on data and insights from Energy Insights’ models.

The report outlines recent trends in global refining and presents the company’s outlook on supply, demand and margins.

The outlook also offers a perspective on how changes in global refining capacity, regulations such as MARPOL, and developing economies will impact refining utilisation, crude and product balances, and trade flows.

The global refining market last year saw significant capacity additions coincide with slower demand growth. Looking ahead, more global capacity is slated to be added in the near term, which will lead capacity to continue to outpace demand growth. As a result, utilisation rates are poised to slip.

McKinsey & Company expects European utilisation rates to dip below 70% by 2023 due to declining demand and the region’s sensitivity to capacity additions in Africa, Asia, and the Middle East. While the long-term outlook in Asia remains strong, its utilisation rates will also dip to 73% by 2023. After 2023, growing demand will lead Asia’s utilisation to steadily increase to over 80% by 2026 and higher after that.

Meanwhile, the US Gulf Coast’s unique market conditions will cause utilisation rates to remain in the mid-80s for the foreseeable future.

Other key findings in the report include the following:

  • Global oil demand growth will slow to 0.5% per annum from 2018 to 2035 vs 1.2% in the last few decades.
  • In the next four to five years, there will be almost 7 million bpd of distillation capacity added.
  • MARPOL is expected to raise global refining utilisation 1 – 2% in hub markets in 2020.
  • Light-heavy product differentials are expected to increase by US$13 – 17/bbl across hub markets in 2020 with MARPOL addition.

To read the report summary, click here.

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Downstream news