In the past several years, the oil refining process has drastically balanced the decline in oil prices. However, the same cannot be said for the current situation.
In the wake of the ongoing COVID-19 pandemic, economies are at a down low and oil demands are continuously falling. In fact, an estimation by some analysts reveal that gasoline demand is likely to be slashed in half for the months most affected by the outbreak.
The current status of the industry is already at a problematic stage, where inventories are high and crack spreads are turning negative. This is the point where companies are expected to address these challenges.
It is also best for firms to assess their inventories and identify domestic and global markets that can potentially hold stocks for the short term. This can also help in managing price exposure and stocks level.
Although not ideal, shutting refineries and non-profitable projects down can be a good thing for the company as the capital is preserved and production is maximized for the meantime. The extra time acquired from the shut-in of plants can also be used for maintenance activities to make the resumption of operations smooth.
Indeed, this period of uncertainty can pose numerous questions and challenges for oil companies such as refineries, offshore and petrochemical plants. But in comes a few opportunities, as well, that can enhance the overall operation of the company and give downstream firms clarity and confidence moving forward.
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