LONDON (ICIS)--The fourth quarter of 2013 was the “worst quarter” in years for refiners in Europe, as margins fell on the back of a difficult macroeconomic environment, Switzerland-headquartered investment bank UBS on Wednesday.
The Swiss bank said the European composite margin averaged -$0.28/bbl, resulting in the lowest number observed since UBS started tracking that indicator in 2003. The composite margin for the same quarter in 2012 stood at $4.53/bbl.
The investment bank attributes the decline to a higher level of imports, particularly from the US, as American refiners benefitted from wide crude differentials as well as the struggle for Eurpean refiners to place their surplus gasoline on global markets.
As a result, UBS lowered its fourth-quarter expectations for earnings before interest, taxes, depreciation, and amortisation (EBITDA) in the sector forecasting a 39% fall quarter on quarter and a 31% fall year on year.
Although the European composite margin has improved in 2014, standing at $0.87/bbl in the year to date, the bank still expects a difficult environment for refiners this year.
“We expect to see a more meaningful recovery later in the quarter once we enter the maintenance season but 2014 should still be a challenging year for the sector,” UBS said.
“Following the increase of our 2014 oil price assumption by $5/bbl to $105/bbl, we have cut our 2014 European composite margin forecast to $2.81/bbl from $3.06/bbl to reflect the higher costs,” it added.
UBS lowered the price target of Italy’s Saras PT and Poland’s PKN Orlen and increased that of Turkey’s Tupras, although just on the back of a weaker Turkish lira (TL).
The bank incrases Tupras' price target from Turkish lira (TL) 38 (€12.70) per share to TL40 per share. PKN Orlen's price target is lowered from Polish zlotych (Zl) 39 (€9.42) per share to Zl38 per share while Saras PT’s price target is set at €0.87 from the previous €0.90.
(€1 = TL2.99, €1 = Zl4.14)