Under the imbalance of supply and demand, a large number of new factories have started production, signalling the end of the global oil refining industry's "super cycle."

Notice that refineries in Asia, Europe, and America are facing the issue of declining profitability to the lowest level in years, marking the beginning of a downturn in an industry that saw returns soar after the COVID-19 pandemic, highlighting the current extent of global demand slowdown. As economic growth slows and the popularity of electric vehicles increases, this weakness further indicates softness in consumption and industrial demand. The commissioning of new refineries in Africa, the Middle East, and Asia is also exacerbating downward pressure. Refining companies such as TotalEnergies and Trafigura have enjoyed substantial profits in 2022 and 2023, benefitting from supply shortages caused by the Russia-Ukraine conflict, disruptions in the Red Sea due to Houthi rebels, and a significant recovery in demand after the COVID-19 pandemic. Commodity Context analyst Rory Johnston states, "It appears that the supercycle in refining that we experienced in the past few years may be coming to an end, as new refinery supply will eventually catch up with slower-growing fuel demand." As a benchmark in Asia, refining margins in Singapore fell to $1.63 per barrel on September 17, the seasonal low since 2020. Data from the London Stock Exchange shows that on the same day, diesel margins in Asia hit a three-year low. In the largest consumer country, the United States, demand is lagging behind expectations, with the key indicator of overall profitability, the 3-2-1 crack spread, falling below $15 per barrel for the first time since the beginning of 2021 at the end of August. According to data from an oil price information service company, as of September 13, the gasoline margin on the Gulf Coast averaged $4.65 per barrel, excluding renewable fuel blending obligations, down from $15.78 per barrel a year ago, while the diesel margin was slightly higher at $11 per barrel, compared to over $40 in the same period last year. Diesel oversupply Due to weak demand, oversupply in the global diesel market is one of the main reasons for weak profitability. The International Energy Agency forecasts that diesel and diesel demand will average 28.3 million barrels per day this year, a decrease of 0.9% from 2023, while gasoline, aviation fuel, liquefied petroleum gas, and fuel oil demand are expected to increase during the same period. According to data from the London Stock Exchange, as of the end of August, the diesel margin in Europe fell to around $13 per barrel, the lowest level since December 2021. The average margin in August was $16.6 per barrel, half of the $38.3 per barrel average margin in August 2023. Although seasonal demand may provide support, the short-term outlook remains weak. Energy Aspects analyst Raul Caldaria suggests that refining margins are expected to remain low for the rest of the year, with an increase in European winter diesel demand potentially bringing some upside. Despite stronger demand, gasoline margins in Europe are also facing pressure. According to data from the London Stock Exchange, the average price of gasoline in August was $12.1 per barrel, a 61% drop from the $31 per barrel level in August 2023. A spokesman for ENI Group stated that the Italian refining company is taking measures to mitigate the decline in refining margins but declined to provide details on these measures. A spokesperson for the Spanish refining company Cepsa stated that they are monitoring margins but have not made a decision to slow down processing rates. New refineries The commissioning of a large number of new refineries has intensified profitability pressure, with older refineries (especially in Europe) also feeling the strain. Earlier this month, Petroineos confirmed the closure of its Grangemouth refinery in Scotland, with expectations of closures in German refineries as well. This year's new production capacity includes the 650,000 barrels per day Dangote refinery in Nigeria, the 340,000 barrels per day Dos Bocas refinery in Mexico, the 615,000 barrels per day Al Zour refinery in Kuwait, and the 230,000 barrels per day Duqm refinery in Oman. David Wech, Chief Economist at Vortexa, states, "Global refinery capacity is clearly oversupplied relative to demand levels, and adding new capacity will only make the situation worse." Analysts at a US bank stated on September 13 that they expect global refining margins to continue to decline, with a 25% decline this quarter, a 50% drop in spot prices, and an increase in refining capacity of 1.5 million barrels per day compared to the same period last year.