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2021 INTEGRATED MANAGEMENT REPORT

FOREIGN EXCHANGE TREND DOLAR/EURO

REFINING MARGINS

The European refining market faces a long-term fall in demand, peaking in 2030 and declining from then on4. Product oversupply, due partly to refining overcapacity in Europe and also to new refineries in Asia, is the main threat, coupled with heavy regulation and increasingly restrictive environmental requirements, all of which have a significant impact on refining margin variability.

In 2021, refining margins started the year at low levels, although in the first quarter, once the vaccination process was well advanced, especially in Europe and the United States, together with the OPEC+ announcement of the gradual easing of production restrictions, the outlook for this industry improved. The revival of the economy triggered strong demand from Asia at the beginning of the quarter which, though slowed by a new wave of contagion in Europe leading to further restrictions, allowed for a slight recovery in margins.

In the second quarter of the year, despite the recovery in demand, stocks of oil products in Europe remained high and therefore work at European refineries was kept under control. The exception to this trend was caused by the hacking of the Colonial pipeline in the United States, which led to increased imports from Europe for both immediate consumption and stock replenishment. In addition, developments in petrochemicals, especially benzene, which commanded high prices due to high demand, kept margins at medium-high levels.

In the third quarter, there was a decrease in distillate stocks in Europe, with petrol and diesel levels below the same period of 2019. This, together with the improvement in demand due, among other aspects, to the removal of restrictions (first full quarter in Spain without mobility restrictions) and the summer period in Europe and North America, drove a rebound in refining margins, which remained at these levels throughout the quarter.

In the final quarter of the year, margins also remained high due primarily to stable demand, although the new Omicron variant again fanned uncertainty in the markets.

EXCHANGE RATE

In 2020, the US currency depreciated sharply against the euro due to the COVID-19 pandemic and the good economic outlook for Europe after the first wave of the pandemic. This effect remained in the first half of 2021, but in the second half the euro fell against the dollar following the emergence of the new COVID-19 variant, which had a significant impact in Europe. The closing exchange rate for 2021 was 1.1326 $/ .

Source: European Central Bank.

4 World Energy Outlook 2021. International Energy Agency.

1,25

1,20

1,15

1,10

1,05

1,00

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