* Refining margins to remain strong into 2016 -banks
* Maintenance, strong demand, low crude prices to support
* Q2 2015 refining margins strongest on record
By Ron Bousso
LONDON, Sept 8 (Reuters) - A rare run of strong Europeanrefining profits will extend to the end of the year and beyonddue to extensive plant maintenance, strong fuel demand and lowcrude oil prices, beating earlier expectations, analysts said.
Integrated oil companies such as Royal Dutch Shell and Total, Europe's largest refiner, have seenrefining offset heavy losses from oil production as prices morethan halved since last June to around $50 a barrel.
Benchmark second quarter European refining margins -- theprofit from processing crude oil and selling refined productssuch as gasoline and diesel -- were the strongest for thatperiod since Reuters records started in 1997 at $9.35 a barrel.
And 2015 margins are shaping up to be the strongest since2008 as the price drop sparked demand around the world.
"European refiners are enjoying a rare period of highmargins. We think we are past the peak but that margins arelikely to stabilise at a higher level than expected by themarket over the next couple of years," analysts at UBS said in anote.
Seasonal refinery maintenance around the world is expectedto average 5 million barrels per day (bpd) in September andOctober, around 7 percent of global refining capacity, limitingoil product supplies, according to Barclays.
"This together with seasonally higher demand for heating oilin colder weather and lower crude losses at low oil prices willin our view support refining margins for the rest of this year."
Although Europe's maintenance schedule this autumn isexpected to be relatively low, a high number of diesel producingunits totalling some 300,000 bpd is planned to go down forturnaround, a fact which has supported refining margins.
Barcalys rated Shell and Total as "overweight".
Independent refiners such as Turkey's Tupras, Finland'sNeste, Greece's Hellenic Petroleum andMotor Oil are also set to benefit, said UBS, whichrated them all as "buy".
SPARE CAPACITY
In the longer term, margins are likely to stabilise athigher levels than previously expected due to faster thanexpected demand and lower oil prices, UBS said.
Several refining projects that have been cancelled ordelayed in recent months such as Shell and Qatar Petroleum'sKaraana petrochemicals project, also mean that less thanexpected new refining capacity is set to come on line in thecoming years.
Between 2015 and 2017, 1.2 million bpd of new refiningcapacity is expected to come on line around the world, mostly inthe Middle East and Asia, according to UBS.
On the other hand, global demand is expected to grow by 1.4million bpd over the same period, the bank said.
UBS forecasts the European refining margin to average $5 abarrel between 2015-2017 compared with $3.3 a barrel between2010 and 2014.
Europe's structural refining overcapacity that plagued thesector before the current "golden age" is set to neverthelessweigh from 2018 onwards, it said.
(Editing by William Hardy)
BP (BP.)
