European refining is having a moment. Firm product demand, low inventories and relatively low crude prices have combined with geopolitical turmoil, sanctions and tight refining capacity to drive robust margins and surprisingly strong downstream profits. And new US sanctions on Russia’s two largest oil producers, plus EU restrictions targeting product imports made from Russian crude, could keep the good times rolling into next year. The strength in Europe’s refining sector has surprised even industry insiders. TotalEnergies CEO Patrick Pouyanne said the company’s European refining margins averaged about $75 per ton in October, easily surpassing the “above $50” guidance the firm had provided only weeks earlier. He said current market levels are closer to $100/ton — approaching the heady days of 2022 when Russia’s full-scale of invasion of Ukraine prompted price spikes across the petroleum complex. The dynamic is also playing out in global markets, but it is more acute in Europe. Exxon Mobil CEO Darren Woods said a “looser crude market and tighter product market” have boosted refining economics worldwide. With reduced feedstock costs and strong prices for diesel and jet fuel in particular, “Those companies that have refineries up and running reliably have added significantly to the bottom line,” Woods said.
