* Crude processing rates to decline by 10 pct in Sept.-Oct.
* Refiners to deepen crude run cuts due to weak margins
* High oil prices on Mideast troubles to keep lid on profits
By Ron Bousso
LONDON, Sept 4 (Reuters) - European refineries will cutoutput by about 10 percent in the next two months throughmaintenance and reduced operating rates, but it will probablynot be enough to pull the industry out of the doldrums, tradersand industry officials said.
Refiners in northwest Europe and the Mediterranean havestruggled in recent weeks with extremely weak profit margins, orcracks, due to soaring crude oil prices.
"It looks rather dire for refiners at the moment. They willneed to react in one form or another such as maintenance, runcuts or even shutdowns," one trader said.
If poor profits last longer than the next few months, someof the current shutdowns could stretch to the long term,analysts said.
Plant overhauls will take down 1 million barrels per day(bpd) of capacity in September and 1.25 million bpd in October,according to Reuters data and trading sources.
The turnaround programme includes BP's 400,000 bpdRotterdam refinery, Exxon Mobil's 246,000 bpd Antwerprefinery and Royal Dutch Shell's 412,000 bpd Pernisrefinery.
While some refineries have moved planned autumn maintenanceforward, others have chosen to reduce their crude processingrates given that oil prices are high and supplies are scarce.
Overall, they cut around 500,000 bpd to reach a total of11.5 million bpd in August.
Refinery runs are set to decline by an additional 250,000bpd in September and October, traders said.
Taking maintenance and crude processing cuts together,European refining throughput will decline to about 10-10.25million bpd over the next two months, a third less thannameplate capacity.
Crude supplies in the region have fallen due in large partto a drop in Libyan oil exports to the lowest level since the2011 civil war, traders said.
Unlike that crisis, no alternative crude sources arecurrently available.
"Libya is a big problem in Europe, specially for refineriesin the Mediterranean, where there is a lot of supply missing.Refining margins have been pretty bad all year, and thesituation is getting worse," said Olivier Jakob, an analyst atPetromatrix.
For example, Libyan oil typically accounts for 27 percent ofItaly's total crude imports, compared with 10 percent for Franceand Germany, he said.
"For now the answer to lower supplies from Libya is to runat lower rates," Jakob added.
HARD TIMES
Refining margins traditionally rise during maintenanceseason due to lower demand for crude and higher prices for oilproducts.
But that may not be the case this time round. Crude oilprices are likely to remain elevated due to severe supplydisruptions not only in Libya, but also in Iraq, Russia and theNorth Sea, traders said.
On top of that Iran's oil shipments have been curtailed bysanctions.
"There is a lot of capacity going down, but then again we donot have a lot of crude available either, with continued lossesat Iraq and a near full loss in Libya," a trader said.
"The typical September-October crude stock builds thatresult from refinery maintenance will be pretty much wiped outby the supply outages," he said.
Crude oil prices are unlikely to drop given the tightsupplies, traders said.
"There is more Urals crude available. but Libya does notseem to be easing, so I do not expect a big drop in prices," acrude oil trader said.
As a result, refineries could decide to extend maintenanceor simply not resume operations, traders and analysts said
"If the refining margins do not improve during maintenance,refineries may just stay shut after maintenance is complete,"Jakob said.
