Global refining margins, as calculated by consultancy Wood Mackenzie, rose to their highest since March 2024 last month, reaching $8.37 per barrel.
Wood Mackenzie’s analysis of oil refinery margins highlights several key trends and insights based on their recent reports.
Refining margins are expected to remain strong through the 2020s due to tight global product markets, with a “rising tide lifts all boats” scenario limiting refinery rationalization in the near term. Their global composite refining margin peaked at US$25/bbl in June 2022, driven by the Russia-Ukraine conflict, but by April 2023, it had fallen to the upper end of the five-year range, down 70% from 2022 peaks. Complex hydrocracker margins remain advantaged due to middle distillate demand, while gasoline-focused margins are weaker due to electric vehicle penetration.
Margins are projected to decline post-2030 as global oil demand peaks, likely in the early 2030s, particularly in Europe, where demand is dropping due to electrification. By 2035, carbon costs in regions like the EU, UK, and Canada could be three times the global average, pressuring margins for refineries without low-carbon investments. Wood Mackenzie’s 2025 Global Refinery Closure Outlook identifies 101 of 420 refineries (18.4 million bpd, 21% of global capacity) at risk of closure by 2035, with Europe and China facing the highest risks due to declining demand and high carbon costs.
Europe accounts for 60% of high-risk sites, with 5.1 million bpd of capacity at medium or low risk. Asia Pacific and China hold 30% of low-risk capacity across 28 sites. National oil companies (NOCs) are less likely to close refineries due to government backing, while international oil companies (IOCs) may divest or shut down underperforming sites. Whilst Europe and the United States shutter downstream capacity, upcoming giants such as Nigeria’s 650,000 b/d Dangote refinery or Mexico’s 340,000 b/d Dos Bocas continue to be plagued with operational disruptions.
Refineries integrated with petrochemical units, especially steam crackers, often have stronger margins due to growing demand for plastics. However, of the 101 at-risk refineries, only 29 are petrochemical-integrated, and just 13 have steam crackers, which face closure risks, potentially undermining the entire site’s viability.
In 2015, global net cash margins (NCM) rose nearly 50% from 2014 due to falling crude prices and increased gasoline demand. In contrast, 2020 saw margins drop to a historic low of US$1.40/bbl due to COVID-19, with global utilization rates at 70%. Margins partially recovered to US$2-3/bbl through 2025, but remain below the US$4.40/bbl average of the 2010s.
/X, Wood Mackenzie/