Increases in global refinery throughput in 2014 are being led by refining industries in Russia, Saudi Arabia and the United States with access to discounted crude oil feedstocks, according to ESAI Energy’s recently published Global Refining Outlook. And with export‐oriented refiners in each of these countries looking to compete for market share in Europe, that region’s refinery operators should see their margins and profitability squeezed.

In an environment of mostly deteriorating benchmark refining margins, global throughput rates are being led higher by refiners in Russia, Saudi Arabia and the U.S., where crude processing is set to rise, on a yearly basis, by a combined 1.2 million barrels per day in the first half of 2014 and another 600,000 b/d in the second half.

“These three industries are being bolstered by new refining capacity and by their access to crude feedstock that is priced below international market rates,” says Christopher Barber, a Manager of Refining at ESAI Energy. “Cheaper crude oil inputs are insulating these operators from any deterioration in global refining margins.”

Throughput in Saudi Arabia is rising due to some of the lowest crude oil production costs in the world and the addition of two 400,000 b/d refineries, one of which launched late last year. Russian throughput is benefitting from an oil export duty structure that ensures that the domestic crude price is heavily discounted relative to refined products and encourages high utilization rates. Increases in U.S. refining are being driven by the greater access of coastal refiners to inland North American crude that is trading at a discount to international benchmark Brent.

Growing throughput elsewhere has big consequences for Europe, where refiners are beholden to feedstock priced against Brent. European margins are also exposed to U.S. and Russian deliveries of diesel to OECD Europe, which imported a record 460,000 b/d from those sources in the past 12 months. Meanwhile, the U.S. and Saudi Arabia are importing fewer barrels of European gasoline. According to Barber, “the bigger than usual increase in product supply in the U.S., Russia and

Saudi Arabia in 2014 represents an inflection point for Europe’s vulnerable refineries.”