LAUNCESTON, Australia: Profits at Asian refineries are being buffeted by a combination of factors, chief among them uncertainty over how exactly new shipping fuel standards will play out and the rise of China as a product exporter.
Refinery margins in Asia have been knocked to the lowest since the financial crisis in 2008 by some measures, as the industry grapples with the disparate factors.
The return from processing a barrel of Dubai crude at a typical Singapore refinery was a loss of $1.19 a barrel in early Asian trade on Monday. This compares with the October average profit of $4.11 a barrel and the 365-day moving average of $4.08 a barrel.
Another measure of refinery profits is known as gross refining margins, which measures the incentive a refiner has to process an additional barrel of crude, and not total profit derived from all barrels of oil sent through the plant.
Under this measure, a typical Singapore refinery processing a barrel of Dubai crude is making a loss of $10.53 a barrel, which is actually slightly worse than the low of $10.49 seen in July 2008. The gross refining margin has also dropped rapidly, given it was at a profit of $6.14 a barrel on Sept. 23.
What the numbers show is just how quickly refining margins have collapsed in recent weeks.
Part of the problem is a surge in the availability of gasoil, the fuel used to make diesel and jet kerosene.
Refineries in China are exporting more diesel and jet kerosene, a result of a combination of factors including soft domestic demand growth, the addition of new refining capacity and a desire to use up export quotas prior to the end of the year.
China’s exports of diesel jumped 11.5 percent in the first 10 months of the year, while those for jet kerosene surged 21.5 percent, according to official figures.
Gasoil exports from Asian producers, including China, are expected to be around 7.5-8.0 million tons in November, up from October’s 7.3-7.4 million, according to Refinitiv Oil Research, which tracks tanker movements and port data.