* BP, Shell see refining profit double in Q3
* Falling oil price and maintenance boost refining margins
* Refining overcapacity to continue weighing on sector
By Ron Bousso
LONDON, Oct 31 (Reuters) - Refining was a unusual brightspot for European oil majors in the third quarter, but itssupport is quickly evaporating as the convergence of rapidlydeclining oil prices and high refinery outages fades in the lastquarter of the year.
Britain's BP, Royal Dutch Shell, France'sTotal and Italy's Eni all found their lastquarter results were boosted by refining and trading whichoffset heavy declines in revenue from oil, whose price hasdropped by more than 20 percent over the past four months.
Shell's and BP's downstream profits more than doubled to$1.8 billion and $1.5 billion respectively from a yearearlier.
"Compared with 2013, the third-quarter result benefited fromsignificantly stronger refining margins, a stronger contributionfrom supply and trading and improved margin delivery in ourfuels business," BP said in its earnings results.
Total's third-quarter European refining margin indicator,which measures the profit from refining crude oil, nearlytripled from a year ago at $29.90 per tonne. October's marginswere nearly as high, the French refiner's chief executiveofficer Patrick Pouyanne said.
But things are set to change rapidly as refineries inEurope, the United States and Asia return from seasonalmaintenance and increase global supplies of fuels such asgasoline, diesel and aviation fuels.
"Although global refining margins initially strengthenedduring the Q3-2014 period, they have weakened considerably inthe past month despite the sharp fall in crude prices. Lookinginto the regions individually, we see that the Med region showsthe biggest fall in margins followed by Northwest Europe, U.S.Gulf Coast and Singapore," analysts at Deutsche Bank said in areport.
MORE PRESSURE
European refiners have struggled in recent years with alarge capacity overhang that led to a string of refineryshutdowns.
Around more than 10 percent of the current 15 millionbarrels per day (bpd) of European refining capacity, roughly 10medium-sized refineries, will need to be shut down by 2018 inorder to balance the market, according to analysts.
Under new CEO Claudio Descalzi, Eni, which has five whollyowned refineries in Italy and one half-owned plant, is seekingto scale back its refining business in Italy by converting someof its plants. Total is also expected to scale back its Europeanrefining business while Shell, which has sold several plants inrecent years, is reviewing its global refining business too.
"There is a huge overcapacity in the industry, well over 10percent, and it continues to grow as new refineries come onstream," Shell CFO Simon Henry said.
"The primary driver in the medium to long term is the overcapacity and weakness in demand. Although margins are at abetter place at the moment than they were a year ago, we cannotbuild our strategy around that," Henry told reporters.
The global refining industry is set to come under morepressure next year as huge refineries start production in theMiddle East and Asia, including the 400,000 barrels per day(bpd) Saudi Arabian-Chinese Yanbu refinery and the 400,000 bpdRuwais refinery in the United Arab Emirates.
(Reporting by Ron Bousso. Additional reporting by Michel Rosein Paris and Stephen Jewkes in Milan, editing by David Evans)
BP (BP.)
