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Is The Oil Rally Nearing Its End?

Is The Oil Rally Nearing Its End?

After a momentous rally this…

Charles Kennedy

Charles Kennedy

Charles is a writer for Oilprice.com

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Asian Refinery Margins Crash To Nearly $0

Asian refiners are struggling with a major slump in profit margins because of the resurgence in Covid-19 infections in the region, Bloomberg has reported, citing the latest trends in complex refining margins in Singapore.

These fell from $1.65 per barrel in April to just $0.03 per barrel in the middle of May. Since then, the report notes, however, margins have begun improving and are expected to continue strengthening, especially in the second half of the year when vaccinations are expected to improve the fuel demand outlook. At the end of May, Singapore complex margins had jumped to $0.60, higher than the trough in mid-may but still far from the April average.

The effect of the resurgent coronavirus in Asia is the latest blow to an already troubled industry that, like its peers around the world, saw demand for fuels drop off a cliff last year amid lockdowns aimed at stemming the spread of the disease.

China was the first and quickest to recover, but for the rest of Asia, things haven’t been so positive. In India, especially, refiners are currently considering lowering their run rates this month as demand for fuels weakens because of the continuing pandemic.

These demand trends earlier this year led to a glut of fuels, especially jet fuel, on top of which legacy refiners had to contend with new capacity coming on stream.

Older refineries in Asia and the Middle East, which yield more middle distillates, were particularly at risk of permanent closures due to unprofitable or uncompetitive low-profit-margin operations. At the same time, crude oil prices above $65 a barrel have made raw materials more expensive for processors.

Bloomberg quoted energy consultancy FGE as saying that India was the biggest factor for Asian fuel demand: demand there was seen falling by as much as 20 percent between April and this month compared with the first quarter. 

By Charles Kennedy for Oilprice.com

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