March 20, 2020 / 12:50 PM / 17 days ago

UPDATE 1-Oil refiners reduce output as coronavirus cuts fuel demand

(Adds Shell Pernis)

By Ahmad Ghaddar and Ron Bousso

LONDON, March 20 (Reuters) - European oil refineries are reducing operations as they face an unprecedented fall in fuel demand brought about by the coronavirus pandemic.

In the United Kingdom, INEOS shut down a 35,000 barrels per day crude unit at its 200,000 bpd Grangemouth refinery on March 17, according to industry monitor Genscape.

A source familiar with the plant's operations said the shutdown was related to deteriorating profit margins for fuels produced at a refinery including aviation and motor fuels.

"Horrendous margins and even worse physical markets," the source said when asked about the cause of the shutdown.

A spokesman for the company declined to comment.

With planes around the world being grounded, demand for jet fuel, once one of the biggest factors in oil demand growth, has fallen off a cliff, with prices for the fuel in Europe now at record lows.

Refiners in Europe are producing gasoline at a loss.

"Refiners must cut runs now to manage the situation," consultants FGE said in a note.

Oil major BP also shut down a 70,000 bpd crude unit at its Gelsenkirchen (Scholven) oil refinery in Germany on March 18, Genscape said.

BP declined to comment. But two trading sources said the shutdown was an economic run cut.

In France, where the population is currently under government enforced lockdown, oil major Total delayed the restart of its 102,000 bpd Grandpuits refinery near Paris by eight days to April 1, CGT union delegate Thierry Defresne said.

Other sources said the maintenance work at the company's 110,000 bpd Feyzin refinery was suspended.

At Europe's largest oil refinery, the 404,000 bpd Pernis plant in the Netherlands, Royal Dutch Shell on Monday said operations would continue and a major maintenance that it planned for early May will go ahead.

It is difficult to gauge how extensive is the fall in fuel demand the outbreak of the coronavirus has caused as the situation is changing day by day and more and more cities are shutting down.

The head of research at the world's biggest oil trader Vitol said on Friday demand could fall by more than 10%, or 10 million bpd. (Additional reporting by Shadia Nasralla Editing by David Goodman, Giles Elgood, Kirsten Donovan)

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