Europe January 22 2025 : Optimism is spreading across the global refining industry as refinery margins show signs of recovery, buoyed by a combination of rising crude demand, tightening diesel supplies, and a rebound in economic activity in key markets.
European Refinery Margins Recover
TotalEnergies, one of Europe’s leading energy companies, recently reported an uptick in its European Refining Margin Indicator (ERMI). Margins rose to $25.90 per metric ton in Q4 2024, compared to $15.40 in the previous quarter. The improvement highlights stronger product demand, particularly for diesel and jet fuel, as the European economy stabilizes.
Global Factors Support Margins
The International Energy Agency (IEA) has reported that global refinery runs reached a five-year high of 84.3 million barrels per day in December 2024, driven by increased activity in the United States, the Middle East, and Africa. Refinery throughput is expected to grow by 660,000 barrels per day in 2025, creating opportunities for refiners to capitalize on higher demand.
New U.S. sanctions on Russian diesel exports have further tightened supply, driving up diesel prices and refining margins globally. Diesel crack spreads—a key profitability metric for refiners—have surged to multi-month highs, adding to the bullish outlook.
U.S. and Asia Add to Optimism
In the U.S., the Energy Information Administration (EIA) has forecasted stable refinery margins for 2025, supported by steady gasoline and diesel prices. Meanwhile, Asia’s refining giants are benefitting from recovering domestic consumption and export opportunities, although China’s refining sector faces challenges due to peaking demand and evolving policy dynamics.
Market Analysts Weigh In
Industry experts suggest that the current environment offers a favorable setup for refiners. “Tightening product markets, combined with robust demand, are creating a strong foundation for margins,” noted a leading analyst. However, geopolitical risks and shifts in energy policies remain key factors to watch.
Outlook
As the energy market adapts to evolving supply-demand dynamics, refiners are poised to benefit from sustained global economic recovery and rising energy consumption. While uncertainties persist, the sentiment across the refining sector is increasingly bullish, with potential for sustained margin improvement in the months ahead.
