The general profitability of oil and oil merchandise decreased in 2024, persevering with a sustained decline from record-breaking highs in 2022, when margins greater than doubled historic averages.
That’s what was said in a McKinsey report on commodity buying and selling despatched to Rigzone final week, which was penned by Joscha Schabram and Roland Rechtsteiner, who’re each companions in McKinsey’s Zurich workplace.
The report famous that oil worth volatility additionally declined in 2024 in contrast with the earlier yr, however highlighted that “varied elements, together with latest geopolitical developments within the Center East, led to elevated volatility within the third quarter of 2024”.
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McKinsey’s report additionally said that 2024 “was an particularly difficult yr for a lot of asset-backed merchants working within the refining area”.
“Elevated world refining capability, coupled with comparatively weak demand for petroleum merchandise in the USA and different OECD nations, pushed down refining margins,” it mentioned.
“2024 additionally noticed closures introduced for a number of refineries in Europe and the USA, paired with new capability coming on-line in areas with rising demand, such because the Center East and Africa,” it added.
The McKinsey report went on to warn that “a number of elements might drive an uptick in crude worth volatility in 2025”.
“Current years have seen constrained upstream capital expenditures, which might restrict crude provide within the quick time period,” it famous.
“Geopolitical developments stay a serious supply of volatility, with crude pricing and availability affected by ongoing developments in Japanese Europe and the Center East,” it mentioned.
“On the time of this text’s publication, proposed tariffs on imports to the USA might reshape crude flows, probably rerouting a small portion of some Canadian crude to new markets in East Asia by way of the expanded Trans Mountain Pipeline,” it continued.
The McKinsey report said that the difficult working surroundings for refiners supplies service provider buying and selling firms a chance to extend their publicity to downstream belongings.
“Leaner working buildings, decrease overhead prices, and business buying and selling acumen can empower these gamers to interact in worthwhile asset-backed buying and selling exercise,” it mentioned.
“Some unbiased merchants have already begun to interact in M&A, deploying money amassed through the latest growth to buy stakes in European and Asian refineries and worldwide retail – a development that can doubtless speed up within the close to future,” it highlighted.
“Incumbent asset-backed gamers will doubtless proceed leveraging business and operational levers to extract the total worth from their downstream portfolios,” it went on to state.
Taking a look at the long run, the report mentioned “a gradual consolidation of margins in oil and oil merchandise is probably going, with demand probably plateauing in some unspecified time in the future between 2025 and 2035”.
“Within the quick time period, knowledge present China shifting away from its function as the first driver of worldwide demand (a mantle that can doubtless be taken up by non-OECD economies resembling Brazil, India, and the Center East),” it added.
A bio web page on Schabram hosted on McKinsey’s web site notes that he “co-leads … [McKinsey’s] Commodity Buying and selling in addition to Danger and Resilience Service Line with a selected deal with energy and gasoline markets”. A bio web page on Rechtsteiner hosted on McKinsey’s web site states that he “leads McKinsey’s commodity threat and buying and selling work on a worldwide foundation”.
McKinsey describes itself on its web site as a worldwide management-consulting agency dedicated to serving to establishments within the non-public, public, and social sectors obtain substantial and lasting enhancements of their efficiency.
The corporate focuses on a number of industries, together with oil and gasoline, electrical energy and pure gasoline, and chemical compounds, its web site exhibits. McKinsey was based in 1926 and has consultants in additional than 60 international locations, in line with its web site.
To contact the creator, e mail andreas.exarheas@rigzone.com
