UBS announced a revised outlook on the global oil refining industry, anticipating a significant tightening of supply balances in the coming years.
This adjustment is primarily attributed to two critical factors: widespread project delays in new refinery constructions and a series of additional refinery closures globally, according to an Investing.com report.
These developments are expected to collectively impact the refining capacity, leading to a more constrained supply environment than previously projected.
The revised outlook underscores the challenges facing the refining sector, including the complexities of large-scale industrial projects and the economic pressures leading to the decommissioning of older facilities.
According to its latest analysis, the investment bank now anticipates tighter oil balances in 2025 by 200,000 barrels per day and in 2026 by 700,000 barrels per day.
UBS has adjusted its timeline for the Barmer plant in India, pushing its operational start from the second half of 2025 to early 2026.
This 180,000 barrels per day facility’s delay is one of several factors UBS considered.
The bank also factored in the scheduled closure of the Benicia refinery, which has a capacity of 170,000 barrels per day, set for early 2026.
Furthermore, UBS accounted for the potential shutdown of the Lindsey refinery in the UK, an approximately 110,000 barrels per day operation.
These collective adjustments reflected UBS’s updated outlook on global refining capacity.
Demand projections
UBS has updated its demand projections for refined products, now anticipating growth of 400,000 barrels per day in 2025, an increase of 100,000 barrels a day from prior forecasts.
The bank also forecasts demand growth of 600,000 barrels daily in 2026, marking a significant upward revision of 600,000 barrels per day compared to previous estimate.
Expected global economic growth for 2025 is now 2.8% and for 2026, 2.7%, according to the bank. These improvements are attributed to higher GDP growth prospects and a weaker dollar.
European refining margins
For fiscal year 2025, UBS has increased its European composite refining margins forecast by 14% to $5.7 per barrel.
The forecast for fiscal year 2026 also saw an increase of 13%, reaching $4.2 per barrel.
UBS reported significant margin volatility in the second quarter of 2025, with fluctuations exceeding $10 per barrel.
The Iran-Israel conflict underscored Europe’s tight middle distillate supply.
Despite concerns, the conflict did not severely disrupt physical oil flows, but it did reveal underlying vulnerabilities in the market’s stability and regional supply chains, prompting close monitoring of geopolitical developments by analysts, the bank said.
UBS believes that further refinery closures are necessary, particularly in Europe, to restore market equilibrium to pre-COVID levels.
They estimate that over 3 million barrels per day of capacity will need to be shut down by the end of 2027.
Europe remains the region facing the most significant challenges, according to the bank, indicating that the difficulties at the Lindsey refinery are probably not isolated incidents.
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