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Investing.com - UBS on Thursday revised its oil refining outlook, citing project delays and additional refinery closures that will tighten global supply balances in coming years.
The investment bank now anticipates tighter oil balances in 2025 and 2026 by 0.2 million barrels per day (Mb/d) and 0.7 Mb/d respectively, according to its latest analysis.
UBS incorporated a minor delay for India’s 180,000 barrels per day Barmer plant to early 2026 from the second half of 2025, while also accounting for the announced closure of the 170,000 barrels per day Benicia refinery in early 2026 and possible shutdown of the approximately 110,000 barrels per day Lindsey refinery in the UK.
UBS has also positively revised its demand estimates, projecting refined products demand growth at 0.4 Mb/d in 2025 (up 0.1 Mb/d from previous forecasts) and 0.6 Mb/d in 2026 (up 0.6 Mb/d).
These improvements reflect higher GDP growth prospects and a weaker dollar, with global economic growth now expected at 2.8% for 2025 and 2.7% for 2026.
The bank raised its European composite refining margins forecast for fiscal year 2025 to $5.7 per barrel (up 14%) and fiscal year 2026 to $4.2 per barrel (up 13%).
UBS noted that second quarter 2025 was volatile for margins, which moved in a range exceeding $10 per barrel, with the Iran-Israel conflict highlighting middle distillates tightness in Europe despite not causing major disruptions to physical flows.
Looking longer-term, UBS maintains that more refinery closures will be needed, especially in Europe, with over 3 Mb/d of capacity closures required by year-end 2027 to return market balance to pre-Covid levels.
The bank continues to view Europe as the most challenged region, suggesting the troubles of the Lindsey refinery are unlikely to be the last.
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