Asia distillatesgasoil cracks drop as coronavirus hits demand. Refining margins are turning negative on the drop in gasoline demand and global refiners. Asia refiners run cuts cant keep pace with plunging fuel margins 492020 asia pacific oil refineries are finding that processing cuts are not keeping pace with sharp drops in fuel margins, which hit record lows this month, caused by the demand decline from the economic dislocations of the coronavirus outbreak. Singapore asia oil refining margins have more than tripled in the past three weeks to hit their highest since september 2017, refinitiv data showed on friday, after refiners cut output and. In other words, you expect refining margins are improving either due to crude oil prices falling andor demand for. Planned maintenance at asian refineries in the second quarter of this year is. Asian refining margins for fuel oil are set to hold near their current strong levels through the summer as increased use of the fuel by utilities to. Crack spread refers to the overall pricing difference between a barrel of crude oil and the petroleum products refined from it. Asias q2 planned refinery maintenance to shut 65% more capacity. Crack spread is defined as the difference between the price of a particular crude oil and a weighted average of the prices of a few refined products, as these prices are registered in commodity markets. Companies that planned to trim output include sk energy, a unit of sk innovation, the singapore refinery company src, owned by petrochina and chevron corp and at least one refiner in thailand, five people familiar with the matter said. Asias refining margins rebound to nearly 2year high. Refining margin is the difference between total revenue from refined product sales and total costs of all crude oil and other refinery inputs. Asian refining margins for 10ppm gasoil dropped on thursday, weighed down by ample regional supplies, while the frontmonth spread for the industrial fuel grade widened its.
Exports or imports the future of asian refining industry commentary 3. Computing refining margin requires detailed proprietary information or estimates of a refinery s crude slate, product slate. A recent strengthening in refinery margins in asia is leading to a sense that the worst may be over for the embattled sector as more nations in the region start to. Crack spread is a quickanddirty approximation of refining margin. Refining marker margins are simplified regional margin indicators based upon product yields and a single marker crude oil deemed appropriate for the region site traffic information and cookies we use cookies and equivalent technologies to collect and analyse information on our sites performance and to enable the site to function. We expect global oil refining capacity to increase by 15% over 201825, reaching 116 million barrels per day mmbd in 2025. Crack spread is a term used on the oil industry and futures trading for the differential between the price of crude oil and petroleum products extracted from it. The oil products glut in asia is set to grow much worse over the next three years as chinese and middle east refiners are looking to sell even more fuel in the asiapacific region. Asia distillatesgasoil refining margins drop despite. Refiners are having to pay to produce gasoline oil price. The crack for making a barrel of gasoline from brent crude in singapore gl92sincrk rose to a loss of 24 u. The singapore cracking margin against dubai crude widened. Asia oil refiners consider run cuts with margins at 16.
Update 2asia oil refiners mull run cuts with margins at. Profit margins for producing petrol and gas oil bounce off record lows. Asia pacific refining 2019 roundup stratas advisors. Launceston, australia, nov 25 reuters profits at asian refineries are being buffeted by a combination of factors. Significant increases in capacity across asia and the middleeast. Asia distillatesjet fuel refining margins drop further. Asia naphthas crack spread turns negative on bearish outlook icis. Refiners that could benefit includes reliance, sk innovation and s. The spread approximates the profit margin that an oil refinery can expect to. Meanwhile, asian jet fuel refining margins turned negative for the first. Singapore, july 12 reuters asia oil refining margins have more than tripled in the past three weeks to hit their highest since september 2017, refinitiv data showed on friday, after refiners. The refining crack represents the price difference between the finished, refined products which translate into refiner revenues and the price of crude oil one of the primary factors in refiner.
Regional european refining margins, crack spreads and differentials. Asia oil product prices similarly tanked on monday but at a rate slightly lower than crude, which meant that refining margins actually rose for most products. Thought leadership publications on key industry issues. Asia pacific oil refineries are finding that processing cuts are not keeping pace with sharp drops in fuel margins, which hit record lows this. Singapore asias oil refiners are considering reducing output after margins slumped to their lowest for the season since 2003, according to. Columnnew shipping rules, china pummel asian refinery. The business of refining crude oil into various components has always been volatile from the. Weighed down by depressed refining margins earlier this year, refiners across asia have recently reduced production and some closed down for maintenance, thus boosting asian refining margins in the. Asian refining margins for 10 ppm gasoil dropped, as demand for the. Asian fuel oil refining margins slipped on tuesday, while cash premiums for mainstay 380cst highsulphur fuel oil dropped to their lowest in about a week, hurt by weaker buying interest in. Refining margins are thus dependent on input crude oil cost, product slate, and prices of refined products.
Asia fuel oil margins to be supported through midyear on. The steep deterioration in demand we expect to happen in the west in april and may will also have a big impact on product pricing in asia and put additional pressure on the regions margins, said neil crosby, lead refining analyst at jbc energy. Asia distillatesgasoil refining margins slip, frontmonth. Update 2supply cuts lift asia oil refining margins to. Asian refining margins rise to 15month high on strong jet. Refining profit margins, also known as cracks, for gasoil with 10 ppm. Asias oil refiners are considering reducing output after margins slumped to their lowest for the season since 2003, sources said. Low crude oil prices, increased gasoline demand lead to. The average profitability contribution to net income divided by net investment in place or return on investment roi of u. In addition, some of asias largest oil product export hubs have had to trim refinery run rates for most of this year, due to poor refining margins at the time. New refining capacities come online at a time when oilproduct markets are oversupplied with rising exports from the us, middle east and china, putting downward pressure on product crack spreads and refining margins.
Major downstream capacity expansion projects are coming online around the world. Asia oil refiners mull run cuts with margins at 16year low for season. Asian refining margins strengthen but not without risk. Singapore, april 9 reuters asia pacific oil refineries are finding that processing cuts are not keeping pace with sharp drops in fuel margins, which hit record lows this month, caused by the. Asia oil refining margins more than triple in last three wks data. There has been growing competition among key exporters for refined product markets across the asia pacific region. Asias fuel oil crack for benchmark 180centistoke rose for an eighth session on wednesday, shrinking its discount to dubai crude to its narrowest level in nine months on wednesday. Buying it means you expect the crack spread to strengthen. Asia distillatesgasoil crack holds but refining margins fall by fawad maqsood on june 17, 2019 singapore. Crack spreads are essentially the economics of refining a barrel of crude oil into its constituent products and can be used as a proxy to gauge demand for various distillates.
Refineries in europe, where, for years, the refining sector had low profitability, now have increased refining utilization rates amid improving margins. Asia refiners run cuts cant keep pace with plunging fuel. Asia fuel oilhedging boosts 180cst crack to 9month. Asia naphthas crack spread turns negative on bearish. Singapore icisasia naphtha prices are languishing at 18year lows while the products crack spread, a measure of its refining margin, has fallen to. Refining capacity additions in apac under the profit model, refiners have the responsibility for revenue collection. Computing a crack spread is simple and requires no proprietary information.
Asia oil refining margins hit highest level since 2017 on. Asia distillatesgasoil cash premiums, refining margins climb. Asia distillatesgasoil cracks dive to lowest seasonal levels in 7 years. Asia oil refiners mull run cuts with margins at 16year. Asias naphtha supply from the west had remained high despite lower demand caused by ongoing cracker maintenance, outages at plants in taiwan and japan and an extended shutdown at a naphtha cracker in south korea. As refining margins improve, refiners gain the incentive to add additional capacity.
Although april gasoline crack spreads in asia did not exceed recent record highs, asian refineries have been processing more crude oil compared to the same time last year as margins from. The spread approximates the profit margin that an oil refinery can expect to make by cracking the longchain hydrocarbons of crude oil into useful shorterchain petroleum products in the futures markets, the crack spread is a. Asia distillatesgasoil crack holds but refining margins. Naphthas crack spread against promptmonth ice brent crude oil. The key reason behind the lackluster performance of oil and gas companies, including the likes of exxon mobil, bp plc. Aromatics margins are getting worse so refiners will try to optimize as much as possible, the person said, referring to profits for paraxylene, a petrochemical used to make textile and plastic. Asia distillatesgasoil refining margins, cash premiums. In south korea, refinery runs fell to an average 81. The asia naphtha crack, or refining margin, to brent crude fell into negative territory this month on the back of weakness in the gasoline market just as a surge in. Crack spreads are defined as multiterm ratios, such as a. Asia oil refining margins have more than tripled in the past three weeks to hit their highest since september 2017, refinitiv data showed on friday, after refiners cut output and tightened fuel. Asian margins picking up but china slow to recover. Consumption of fuel, a proxy for oil demand, totalled 16. Supply cuts lift asia oil refining margins to highest.