This week's sale of Germany's Wilhelmshaven oil refinery after the plant sat idle for two years and the revival of a project to build a new plant in Britain both surprised traders, who said they saw little economic rationale for either one, Reuters reports. Private Dutch group Hestya Energy on Wednesday said it would restart the second-biggest German refinery as soon as possible after buying it from U.S. group ConocoPhillips , which had cancelled plans to upgrade the plant and put it up for sale over a year ago.
"I think people are really sceptical it will restart. There was no obvious reaction in the market to the news," said a European fuel oil trader.
GE Oil & Gas on Thursday said it planned to build an oil refinery in Britain in a joint venture with a small UK firm, after a similar project in the same location in Teesside failed a few years ago.
Analysts have said they see no argument for adding new capacity in Europe.
"The only reason you'd start it up is if there is not enough capacity in Europe or if, specifically, there's a shortage of simple capacity. Then it could be quite niche," said a gasoline trader.
But almost a fifth of European capacity is currently unused amid high oil prices and economic gloom on both sides of the Atlantic. Runs in July were at 82 percent, 4 percent lower than last year's at a time when output typically peaks because of the driving season demand.
"The market is nonplussed," by the Wilhelmshaven deal, said a European gasoline broker.
Traders said both announcements were short-term responses to a recent improvement in refining margins.
"Margins are good in these days," a trader said. "But the (GE) project looks dubious to me. A refinery next to it was shut long time ago."
A Reuters model showed refining margins in Europe have improved to about $7.40 a barrel in the last two weeks, compared with an average of about $3.50 in the past year, due partly to a sharp fall in crude oil prices and some demand for refined oil products within the area and from West Africa and Latin America.
Traders speculated that the Wilhelmshaven refinery could be converted into an oil storage terminal, which would have an advantage in its strategic location on the north-west coast of Germany.
Many refineries in Europe have already been turned into storage sites, including a smaller German refinery owned by Shell. The oil major announced plans to convert the 110,000 bpd Harburg plant into a terminal in January this year after failing to find a buyer. #
In 2008, when the margins were at record highs globally, the energy equipment and services arm of GE, the largest U.S. conglomerate, was awarded a contract to build a deep conversion unit in Teesside by SONHOE Development, but the project never took shape.
Petroplus's 117,000 barrel-per-day Teesside refinery was shut in 2009, and the plant now operates as an oil terminal.
"I think people are really sceptical it will restart. There was no obvious reaction in the market to the news," said a European fuel oil trader.
GE Oil & Gas on Thursday said it planned to build an oil refinery in Britain in a joint venture with a small UK firm, after a similar project in the same location in Teesside failed a few years ago.
Analysts have said they see no argument for adding new capacity in Europe.
"The only reason you'd start it up is if there is not enough capacity in Europe or if, specifically, there's a shortage of simple capacity. Then it could be quite niche," said a gasoline trader.
But almost a fifth of European capacity is currently unused amid high oil prices and economic gloom on both sides of the Atlantic. Runs in July were at 82 percent, 4 percent lower than last year's at a time when output typically peaks because of the driving season demand.
"The market is nonplussed," by the Wilhelmshaven deal, said a European gasoline broker.
Traders said both announcements were short-term responses to a recent improvement in refining margins.
"Margins are good in these days," a trader said. "But the (GE) project looks dubious to me. A refinery next to it was shut long time ago."
A Reuters model showed refining margins in Europe have improved to about $7.40 a barrel in the last two weeks, compared with an average of about $3.50 in the past year, due partly to a sharp fall in crude oil prices and some demand for refined oil products within the area and from West Africa and Latin America.
Traders speculated that the Wilhelmshaven refinery could be converted into an oil storage terminal, which would have an advantage in its strategic location on the north-west coast of Germany.
Many refineries in Europe have already been turned into storage sites, including a smaller German refinery owned by Shell. The oil major announced plans to convert the 110,000 bpd Harburg plant into a terminal in January this year after failing to find a buyer. #
In 2008, when the margins were at record highs globally, the energy equipment and services arm of GE, the largest U.S. conglomerate, was awarded a contract to build a deep conversion unit in Teesside by SONHOE Development, but the project never took shape.
Petroplus's 117,000 barrel-per-day Teesside refinery was shut in 2009, and the plant now operates as an oil terminal.