* Around 10 pct of Europe capacity to go down in March-April
* Despite supply cut, margins unlikely to show big increase
By Ron Bousso
LONDON, Feb 14 (Reuters) - Europe's embattled refineries arescheduled to cut output by more than 10 percent during springmaintenance, but any ensuing gain in profit margins will be toosmall to avert further plant closures in a well-supplied market.
Prices of diesel, the bedrock of European refining profits,will remain pressured by huge flows from the United States,Russia and Asia, which have hammered profits at refiners rangingfrom majors Total and Shell to independentslike Italy's Saras and Spain's Cepsa.
Around 1.1 million barrels per day (bpd) of refiningcapacity are expected to go offline in March and April formaintenance, peaking at 1.3 million bpd in early April, according to Reuters data and industry sources.
Those levels are broadly unchanged from a year earlier.
The planned cutbacks include Total's 101,000-bpd Grandpuitsrefinery near Paris, Galp Energia's 225,000-bpd Sinesrefinery in Portugal and Eni's 200,000-bpd Sannazzaro refinerynear Turin, Italy.
About 60 percent of the work will take place around theMediterranean, where refineries have been exposed in recentmonths to particularly weak and often negative margins.
Since September, northwest European and Mediterraneanrefineries have steadily reduced crude processing rates by anaverage of 500,000 bpd, traders and analysts estimated.
Europe's refining capacity stood at around 11.4 million bpdin February, roughly 78 percent of the region's potential,according to the International Energy Agency.
But despite the lower production, refining margins will notincrease significantly, analysts say.
"Our northwest Europe forecast shows some recovery fromtoday's negative GRM (gross refining margin) levels in the nearfuture," said Stephen George, chief economist at KBC AdvancedTechnologies consultancy.
"We're anticipating a gradual recovery in the gasolinecracks over the spring to the point where complex margins are acouple of dollars higher than present levels. It's not going tobe boom times for European refiners but there should be a bitmore breathing room," George said.
LOOK WEST
A possible decline in diesel imports from the United Statesas a result of extensive spring maintenance at U.S. Gulf Coastrefineries and higher domestic demand due to polar temperatureson the East Coast will have only a minor impact on Europe.
"If the U.S. weather remains cold there could be ashort-term improvement in margins but the general trend isexpected to be similar lows as seen in recent months," saidDavid Wech, managing director at Vienna-based consultancy JBCEnergy.
U.S. Gulf Coast refiners remain on track for alarger-than-usual slate of maintenance this spring at an averageof 628,000 bpd of crude distillation capacity in the firstquarter and another 243,000 bpd in the second, IIR Energy datashowed.
CLOSING TIME
With the continuous pressure on margins unlikely to abate,further refinery closures in Europe are almost certainlyunavoidable.
"The European refining sector is still very challengedstructurally - it is on the receiving end of a lot of productfrom better-equipped refining centres on the U.S. Gulf Coast,the Middle East and India," said Vikas Dwivedi, global oil andgas economist at Macquarie.
"So it's an oversupply situation that's large enough thateven the regular maintenance that's planned won't be enough totighten up the market."
Around 2 million bpd of refining capacity, the equivalent of10 medium-sized plants, will need to shut in the next four yearsto balance the market, according to JBC Energy.
"The longer margins remain in the doldrums, the more likelyI think we'll see more of the 'rolling closures' we've seen inItaly in recent years," George at KBC said, adding that sometemporary economic closures should not be ruled out.