OREANDA-NEWS. Depressed oil prices that support demand for fuel, the lower cost of oil for refineries' own consumption and the weaker euro are set to help European refining margins, Fitch Ratings says. This underpins the Stable Outlook for the sector in 2016. Fitch expects margins to moderate in 2016 from the highs of 2015, but revisiting the lows seen in 2H13 and 1H14 seems unlikely.

The longer-term sector outlook is more uncertain. Excess refining capacity, the structural decline in fuel consumption because of growing engine efficiency and environmental policies coupled with stronger competition from new refineries in emerging markets are likely to put pressure on the European refining sector.

Exceptionally high refining margins in 2015 helped pure European refiners improve cash flow and credit ratios after difficult years in 2013 and 2014and partly offset declines in upstream results for integrated companies. Sound refining margins that are expected in 2016 compared with the average in 2013 and 2014 will support the credit profiles of European refiners.