* Around 10 pct of Europe capacity to go down in March-April
* Despite supply cut, margins unlikely to show big increase
By Ron Bousso
LONDON, Feb 14 (Reuters) - Europe's embattled refineries are scheduled to cut output by more than 10 percent during spring maintenance, but any ensuing gain in profit margins will be too small to avert further plant closures in a well-supplied market.
Prices of diesel, the bedrock of European refining profits, will remain pressured by huge flows from the United States, Russia and Asia, which have hammered profits at refiners ranging from majors Total
Around 1.1 million barrels per day (bpd) of refining capacity are expected to go offline in March and April for maintenance, peaking at 1.3 million bpd in early April, according to Reuters data and industry sources.
Those levels are broadly unchanged from a year earlier.
The planned cutbacks include Total's 101,000-bpd Grandpuits refinery near Paris, Galp Energia's
About 60 percent of the work will take place around the Mediterranean, where refineries have been exposed in recent months to particularly weak and often negative margins.
Since September, northwest European and Mediterranean refineries have steadily reduced crude processing rates by an average of 500,000 bpd, traders and analysts estimated.
Europe's refining capacity stood at around 11.4 million bpd in February, roughly 78 percent of the region's potential, according to the International Energy Agency.
But despite the lower production, refining margins will not increase significantly, analysts say.
"Our northwest Europe forecast shows some recovery from today's negative GRM (gross refining margin) levels in the near future," said Stephen George, chief economist at KBC Advanced Technologies consultancy.
"We're anticipating a gradual recovery in the gasoline cracks over the spring to the point where complex margins are a couple of dollars higher than present levels. It's not going to be boom times for European refiners but there should be a bit more breathing room," George said.
LOOK WEST
A possible decline in diesel imports from the United States as a result of extensive spring maintenance at U.S. Gulf Coast refineries and higher domestic demand due to polar temperatures on the East Coast will have only a minor impact on Europe.
"If the U.S. weather remains cold there could be a short-term improvement in margins but the general trend is expected to be similar lows as seen in recent months," said David Wech, managing director at Vienna-based consultancy JBC Energy.
U.S. Gulf Coast refiners remain on track for a larger-than-usual slate of maintenance this spring at an average of 628,000 bpd of crude distillation capacity in the first quarter and another 243,000 bpd in the second, IIR Energy data showed.
CLOSING TIME
With the continuous pressure on margins unlikely to abate, further refinery closures in Europe are almost certainly unavoidable.
"The European refining sector is still very challenged structurally - it is on the receiving end of a lot of product from better-equipped refining centres on the U.S. Gulf Coast, the Middle East and India," said Vikas Dwivedi, global oil and gas economist at Macquarie.
"So it's an oversupply situation that's large enough that even the regular maintenance that's planned won't be enough to tighten up the market."
Around 2 million bpd of refining capacity, the equivalent of 10 medium-sized plants, will need to shut in the next four years to balance the market, according to JBC Energy.
"The longer margins remain in the doldrums, the more likely I think we'll see more of the 'rolling closures' we've seen in Italy in recent years," George at KBC said, adding that some temporary economic closures should not be ruled out.
(Additional reporting by Claire Milhench; Editing by Dale Hudson)
((ron.bousso@thomsonreuters.com)(+44)(0)(2075422161)(Reuters Messaging: ron.bousso.reuters.com@reuters.net))
Keywords: EUROPE REFINING/
