New shipping rules, China pummel Asian refinery profits

Gasoil exports from Asian producers are expected to be around 7.5-8.0 million tons in November, up from October’s 7.3-7.4 million. (Reuters/File)
Updated 25 November 2019

New shipping rules, China pummel Asian refinery profits

  • Refinery margins in Asia have been knocked to the lowest since the financial crisis in 2008 by some measures

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.


Higher impairment charges hit UAE banks Emirates NBD and ADCB

Updated 27 January 2020

Higher impairment charges hit UAE banks Emirates NBD and ADCB

DUBAI: Dubai's biggest lender Emirates NBD reported a 15 percent drop in fourth-quarter earnings on Monday, below analysts' forecasts, on a jump in impairment charges, sending its shares down around 1 percent.

The bank booked impairment charges of 2.06 billion dirhams ($560.88 million) in the quarter, up more than three times from a year earlier due to higher bad debt charges as it consolidated results of newly acquired Turkish lender DenizBank.

Even without DenizBank, impairment charges were up 78 percent on lower writebacks and recoveries. The bank did not give details of these charges.

Banks in the United Arab Emirates (UAE) are bracing for more writedowns from the real sector amid a downturn, especially in the Dubai property market.

Fitch Ratings recently warned a weakening property market in the UAE was likely to put more pressure on the asset quality of the banking sector.

Emirates NBD reported a net profit of 2.02 billion dirhams in the fourth-quarter, down from 2.39 billion dirhams in the same period a year earlier. EFG Securities had projected a net profit of 2.45 billion dirhams.

Full year profit, however, surged 44 percent, underpinned by double-digit growth in net interest income, stronger loan growth and gains from the listing of the bank's unit Network International.

Separately, Abu Dhabi Commercial Bank, the UAE's third-biggest bank, also reported a 16 percent drop in fourth-quarter profit on Monday, hurt by an increase in impairment charges.

Emirates NBD said it expected the Expo 2020 world fair to support multiple sectors in Dubai, but a softening real estate market remained a risk for 2020.