LAUNCESTON, Australia, Nov. 11 (Reuters) – Higher fuel demand has boosted profits at crude oil refineries in Asia in recent weeks, but they have also been helped by lower exports of refined products from the regional heavy truck from China.
Chinese exports of refined fuels fell in October to 3.95 million tonnes, stifling a slight increase in shipments in September and resuming the downward trend seen since April.
The past four months have been the weakest for fuel exports from China since a collapse in mid-2020. Much of this was the result of falling fuel demand in Asia, as many countries have locked down their economies in a bid to fight the coronavirus pandemic.
October’s exports of refined products were also almost a third lower than the same month in 2020. Although the year-to-date figure is still up 3.8%, this reflects strong exports in the first half of the year. 2021.
There are several reasons for the decline in China’s fuel exports in the second half of this year, but the main one is the decline in refinery use, as independent refiners have exhausted import permits for crude and had to reduce their flow.
A power shortage due to limited coal supplies also impacted refineries, with September’s processing of 13.64 million barrels per day (bpd) being the lowest in 16 months.
The decline in exports of refined products from China coincided with stronger demand in Asia, which in turn increased the margins of the region’s export-oriented refineries, despite rising crude oil prices.
A measure of the profit from turning a barrel of Dubai crude into product at a Singapore refinery stood at $ 6.46 a barrel in early Asian trading on Thursday, while the 15-day moving average was 7 , $ 80.
As of June, the profit margin was as low as $ 1.37 a barrel for the month. The recent spike of around $ 8.44 at the end of October was the highest since September 2019.
Perhaps not surprisingly, refinery margins peaked in October, as Chinese fuel exports declined.
RUGGED GASOLINE, GASOIL
A look at the main fuels of gasoline and diesel – the building block of middle distillate for diesel and kerosene – shows strong rallies starting in mid-August.
Profit from manufacturing gasoline from Brent crude in Singapore peaked at $ 18.72 per barrel on October 27, the highest since June 2015. This represents a sharp reversal from the loss of $ 13.15 , hit at the height of pandemic lockdowns in April last year.
The gas oil margin hit $ 13.88 per barrel on November 9, the highest since January 2020 and also a major turnaround from the low point of a loss of 63 cents per barrel seen in May of last year. .
There was more good news for refiners in Asia. India’s fuel demand rose in October to its highest level in seven months as economic activity picked up in the world’s third-largest oil consumer.
Outside of China, there are also encouraging signs of a recovery in fuel demand in Asia. Refinitiv Oil Research predicts that crude imports will increase in November compared to October in Japan, South Korea, Singapore and Taiwan, the biggest importers in Asia behind China and India.
A continued recovery in fuel demand as more Asian countries fully reopen their economies should help keep refinery margins high.
The “X factor” is whether Chinese refiners will return to the export market to seize some of the strong margins currently offered.
Certainly, independent refiners have obtained more import quotas to be used before the end of the year. But it is also likely that authorities in Beijing will prioritize domestic fuel supply to ensure that there are no supply problems during the winter.
It may be necessary to wait for the peak in winter demand for Chinese refiners to re-establish their presence in Asian refined fuel markets.
Editing by Kenneth Maxwell
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