Oil Market Report - September 2024

Investment Rating - The report does not explicitly state an investment rating for the oil industry, but it provides detailed insights into refining margins and methodologies that can inform investment decisions. Core Insights - The International Energy Agency (IEA) has updated its methodology for calculating refinery margins, integrating utility costs and empirical data to provide a more realistic margin assessment [4][21][29]. - The new methodology reflects changes in energy consumption costs, crude grades, and product yields, which are expected to impact refining margins across different regions [29][30]. - The report highlights significant disparities in energy costs between regions, with the USA enjoying a cost advantage due to lower natural gas and LPG prices [29][30]. Summary by Sections Introduction - The IEA has published refinery margins since June 1992, with the latest methodology update in August 2024 aimed at providing a more accurate reflection of market conditions [4]. Refining Hubs - The IEA continues to assess refinery margins for five regions, including Singapore as the only East of Suez hub [7]. Refinery Configuration and Product Yields - The report details various refinery configurations and product yields based on regional characteristics, with adjustments made to yield calculations based on empirical data [10][11]. Crude Grades - The new methodology categorizes crude grades into light sweet, medium sour, and heavy sour, reflecting evolving supply and trade dynamics [13][14]. Petrochemical Margins - A simplified petrochemical margin component has been introduced for Northwest Europe and Singapore, accounting for naphtha used as feedstock in integrated operations [16]. Emission Costs - The report aggregates carbon dioxide emissions from hydrogen production and refinery energy consumption to calculate emission allowance costs for refining hubs [18]. Energy Consumption Costs - Utility consumption costs are now included in the refinery margin calculation, with detailed data on energy consumption by region [21][24]. Refinery Margin Calculation - The updated methodology for calculating refinery margins incorporates yields, prices, and costs, providing a comprehensive view of profitability [28]. Changes Compared to Previous Models - Key changes from the July 2022 model include the addition of marginal energy costs and revisions to yield structures, significantly impacting margins in various regions [29][30].