According to the Guotong Financial APP, French oil giant TotalEnergies (TTE.US) said on Tuesday that due to the global oil price decline, downstream performance is expected to decrease significantly in the third quarter as refining margins in Europe and other regions fall.

In the third quarter of this year, TotalEnergies' refining margin in Europe was $15.4 per ton, significantly lower than the previous quarter's $44.9 per ton. The company will announce this quarter's performance on October 31st.

Brazil's Mero 2 project partially offset the impact of unplanned production halts at Australia's Ichthys liquefied natural gas (LNG) project, with expected oil and gas production reaching 2.4 million barrels of oil equivalent per day for the entire quarter.

The company stated that the performance of its integrated liquefied natural gas segment is expected to exceed $1 billion, while the performance of its integrated electrical utilities division is expected to be essentially in line with the second quarter.

One warning after another.

In fact, apart from TotalEnergies' latest warning, Shell (SHEL.US), Exxon Mobil (XOM.US), and BP plc (BP.US) all previously indicated that refining margins in the third quarter would decline.

The warning signs from these companies indicate a downturn in an industry that saw a surge in ROI after the epidemic, highlighting the extent to which global demand is slowing down.

Due to slowing economic growth and the increasing popularity of electric cars, this further indicates weak consumer and industrial demand. In addition, the upcoming new refineries in Africa, the Middle East, and Asia are increasing downward pressure on refining margins.

Refineries like Total and trading companies like Trafigura achieved substantial profits in 2022 and 2023 by taking advantage of supply shortages caused by the Russia-Ukraine conflict, disruption of Red Sea navigation by Houthi militants, and a significant post-COVID demand recovery.

Analysts say that in the case of weak demand, oversupply in the global diesel market is one of the main reasons for weak profit margins.

The International Energy Agency predicts that this year's average daily demand for diesel and diesel is 28.3 million barrels, a decrease of 0.9% from 2023, while demand for gasoline, aviation fuel, liquefied petroleum gas, and fuel oil has increased in the same period.

Raul Caldaria, an analyst at Energy Aspects, said that refining profits are expected to remain low for the rest of the year, and increased diesel demand in Europe during the winter will bring some upside.

Furthermore, the start of numerous new refineries has also intensified profit pressures.

Commodity Context analyst Rory Johnston said, "It looks like the refining supercycle we've seen in recent years may be coming to an end, as the supply from newly completed refineries is finally catching up with the slowing growth in fuel demand."

Vortexa's Chief Economist David Wech said: "Currently, global refining capacity significantly exceeds demand levels, and new capacity will only make the situation worse."

Bank of America analysts stated in a report on September 13 that with a year-on-year increase of 1.5 million barrels per day in new refining capacity, they expect global refining margins to continue to decline.