Refiners ‘to suffer more pain’

Updated 22 March 2013
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Refiners ‘to suffer more pain’

LONDON: European oil refining margins are likely to stay depressed this year after retreating in the last month due to an increase in excess capacity, Goldman Sachs said in a note.
The bank said that gasoline cracks declined by $ 12.44 per barrel, or 67 percent, from February highs by March 13, but have rebounded $ 3.67 per barrel since then.
According to Goldman, around 530,000 barrels per day (bpd) of refining capacity has been shut down on average each year over the past three years, but that it expects a small cut in refining capacity in 2013.
“Consequently, while European refining capacity has stabilized since the beginning of the year, demand continues to fall sharply, and as a result we expect that the wedge between European refining capacity and European product demand will open going forward.”
Further darkening the outlook the report said that the usual gasoline exports to the United States were unlikely to support prices for long.
“Higher exports are unlikely to sustainably help European refiners as they suffer from much higher costs compared to their US peers,” it said.
European gasoline prices remain lower than the US benchmark RBOB price, leaving arbitrage profitable even after a spike in US ethanol blending credits, or RINs (Renewable Identification Numbers).
US refiners and blenders are required to blend ethanol into gasoline. But an increase in required blending quotas and a drop in gasoline demand have led to a spectacular rally in the value of the RINs since the end of 2012.
From a marginal cost of around 3 cents per gallon at the end of last year, RINs prices rose to more than $ 1 a gallon earlier this month, becoming a major drag on RBOB prices.
Refiners will need to cut runs in order to prevent a glut in stocks.
“European refiners will need to reduce their output in order to prevent product inventories from building, which would likely create continued downward pressure on European product margins over the medium term,” the bank said.
Goldman added that margins for distillates would be more robust than those for gasoline, in part because of lower stockpiles.
“We believe this has been driven not only by distillate inventory levels being even lower than those of motor gasoline currently, but also by the expectation that this relative tightness will persist going forward,” the note said.
It said that distillate demand has declined more slowly than other products, down only 2.3 percent year-on-year in 2012, compared to a 6.9 percent decline in gasoline demand, and that the trend has continued in January and February this year.


Emirates Airline half-year profit slides 86% on oil hike

Updated 15 November 2018
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Emirates Airline half-year profit slides 86% on oil hike

DUBAI: Emirates Airline on Thursday posted an 86 percent drop in half-year profits as the Middle East's leading carrier was hit by a hike in oil prices and currency devaluations.
The Dubai-based airline in a statement its net profit in the six months to September 30 was also impacted by other challenges and expected tough months ahead.
Emirates said it recorded a profit of just $62 million in the first half of the 2018-2019 fiscal year compared with $452 million in the same period last year.
"The high fuel cost as well as currency devaluations in markets like India, Brazil, Angola and Iran, wiped approximately 4.6 billion dirhams ($1.25 billion) from our profits," said Sheikh Ahmed bin Saeed Al-Maktoum, chairman and chief executive of Emirates Group.
Emirates, one of the world's biggest airlines, said fuel costs rose by 42 percent compared with the same period last year.
The company, which flies to more than 150 destinations, said the cost of fuel amounted to a third of its expenses.
Emirates is the world's largest operator of Airbus A380s with more than 100 of the superjumbos in its fleet.
"The next six months will be tough, but the Emirates Group's foundations remain strong," Sheikh Ahmed said in a statement.
In the six months to September 30, the airline carried 30.1 million passengers, a rise of three percent on the last fiscal year, the company said.
Emirates' revenues were 10 percent higher than the previous year at $13.3 billion.
"We are proactively managing the myriad challenges faced by the airline and travel industry, including the relentless downward pressure on yields and uncertain economic and political realities in our region and in other parts of the world," said Sheikh Ahmed.
Profit for the Emirates Group, which also includes Dnata, a leading air services provider, was also down by 53 percent to $296 million.