June 13, 2012:

LONDON--Global demand for crude from refineries is set to jump seasonally by 2.8 million barrels a day between April's low and August as maintenance season ends and demand for refined products recovers from extreme lows seen over the four quarters to the end of March, the International Energy Agency said in its monthly oil market report Wednesday. "New capacity in China and India, as well as the restart of some Petroplus plants in Europe, will also contribute to higher runs," the Paris-based energy watchdog said. Gasoline is seen as the biggest contributor to refined products demand recovery, said Matt Parry, a senior IEA oil market analyst.

"Gasoline demand went from falling in year-on-year terms to predicted modest gains in 2012," he said. "Jet and fuel oil have also demonstrated muted signs of picking up after heavy falls in 2011." "Regionally, OECD Pacific and Africa led the uptick," Mr Parry said, referring to the Organization for Economic Cooperation and Development. The IEA expects global runs--or the amount of crude refiners process into oil products--to average 74.3 million barrels a day in the second quarter, up 390,000 barrels a day on the year, and 75.9 million barrels a day in the third quarter, up 345,000 barrels a day on the year.

"Despite generally worsening refining economics, global crude runs are assessed 585,000 barrels a day higher in May compared with April, at 74.1 million barrels," the watchdog said, adding that most of the increase came from the U.S. Throughputs are expected to reach a seasonal peak of 76.3 million barrels a day in August, the IEA said. "[However] the continued ramp-up of runs at new capacity in Asia, and the resumption of operations at four of Petroplus's five European refineries over coming months, could again put further downward pressure on [profit] margins and force economic run cuts if oil product demand growth disappoints," the IEA said.

Swiss-based Petroplus Holdings AG (PEPFY), once Europe's largest independent refiner, lost access to all its credit lines and then filed for insolvency in January. Three of its refineries have been bought by commodity trading houses and the Petit Couronne refinery in France is set to restart at reduced rates on 14 June thanks to a tolling deal. Refinery runs in China, the world's second-largest oil consumer, rose in May slower than expected as refinery maintenance remained high, the IEA said.

"While lower recent international crude prices have improved economics for domestic refiners, companies have said that they were still operating at a loss," the watchdog said. But Chinese refinery runs are expected to increase from June, as maintenance winds down and also as new capacity is ramping up, said Toril Bosoni, a senior IEA oil market analyst. "With sharply falling crude prices, there is the opportunity to improve margins further by delaying or adjusting product prices [down] by less," she said.

"Our underlying assumptions are that Chinese demand growth will pick up from the low levels seen in the last few months," Ms Bosoni added. The watchdog expects global oil demand in 2012 to grow 820,000 barrels a day from 2011, to 89.9 million barrels a day.

By Dow Jones Newswires