According to Caijing Finance App, French oil giant TotalEnergies SA (TTE.US) stated on Tuesday that amid a global drop in oil prices, downstream performance in the third quarter is expected to significantly decline due to decreasing refining margins in Europe and other regions.

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

Brazil's Mero 2 project partially offset the impact of unplanned shutdown at Australia's Ichthys liquefied natural gas (LNG) project. The oil and gas production for the entire quarter is expected to reach 2.4 Mboe/d.

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 sector is expected to be consistent with the second quarter.

Warning signs in succession.

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

The warning signs of these companies indicate a downturn in an industry that saw a surge in ROI after the epidemic, highlighting the extent of the current global slowdown in demand.

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

Refineries like Total and trading companies like Trafigura achieved hefty profits in 2022 and 2023 as they capitalized on supply shortages caused by the Russia-Ukraine conflict, disruptions in Red Sea navigation by Houthi militants, and a significant recovery in demand post-COVID-19 pandemic.

Analysts state that in the context of weak demand, oversupply in the global diesel market is one of the main reasons for the softening of 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 commissioning of numerous new refineries is exacerbating profit pressures.

Commodity Context analyst Rory Johnston said: "It appears that the super-cycle in refining we've experienced in recent years may now be coming to an end, as the supply from newly completed refineries finally catches up with slowing growth in fuel demand."

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

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