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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 past three weeks to their highest since September 2017, Reuters reported on Friday, citing data from Refinitiv.
In the last three weeks, the benchmark Singapore refining margin more than tripled to US$9.37 a barrel at Thursday’s close of Asian markets, from just US$2.74 per barrel on June 21. Profits for gasoline, diesel, naphtha, jet fuel, and high-sulfur fuel oil (HFSO) have all increased in the past weeks, after falling to multi-year lows earlier in the year, Reuters reported.
Some refiners across Asia have shut down for maintenance, and others have reduced fuels production after Asia’s refining margins slipped to a 16-year low in May.
Some Chinese refiners are also curtailing refinery runs in the third quarter as massive refinery start-ups and slowing domestic fuel demand have created a fuel glut in the country, hurting refining margins.
A fuel glut coming from China weighed heavily on Asian margins earlier this year. An increase in refining capacity, particularly from the independent refiners, and another increase in oil product export quotas have seen a substantial increase in the availability of Chinese oil products in the region, and this increase has added its own pressure to refining margins.
Although refiners in Asia were not left without choice for crude after the end of the U.S. sanction waivers for Iranian oil, the higher price of alternative supplies, as well as soaring fuel exports from China, were depressing refining margins across Asia in May and for most of June.
Asian oil buyers haven’t had problems with procuring alternate supplies of crude oil to their usual cheap Iranian supplies, but the barrels replacing Iran’s oil come at higher prices that hurt the profits of refiners across Asia.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.