Moody’s: New Chinese plants could hamper global refining earnings

HOUSTON — Cheap natural gas and oil supplies will give Gulf Coast refiners an edge in global markets, but over the next two years, new plants coming online in China and the Middle East are poised to dampen worldwide demand for refined products like gasoline, according to a report released Monday.

While Phillips 66, Marathon Petroleum and Valero Energy stand to gain from a growing bulge in oil supplies on the Gulf Coast, Chinese refiners are scheduled to bring more than 1.2 million barrels per day of capacity to market through next year. That growth is expected to outpace demand and to be a drag on the refining industry’s earnings, according to a report from Moody’s Investors Service.

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Middle Eastern oil refiners could add another 1 million barrels per day next year as well, as India’s need for gasoline and other products falls amid a slowing economy and rising government price controls. Moody’s said it anticipates global demand for refined products to grow by 1.2 million barrels per day this year and for earnings to increase by 8 percent by next year, though slowing economic growth in China could tilt the industry’s scales downward.

Meanwhile, Gulf Coast refiners are using fewer energy imports as the United States slashes into its orders for overseas oil. The U.S. Energy Administration recently said the nation’s net energy imports fell last year to their lowest point in more than 20 years, as crude production surges from shale-oil fields.

The southern leg of the Keystone XL Pipeline and other infrastructure has drained a glut at an oil hub in Cushing, Okla. and sent large supplies to the Gulf Coast, reducing local prices for refiners. North American refiners are expected to grow earnings 10 percent over the next two years, while Asian competitors boost their take home by just 2 percent this year, Moody’s said.

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