By ERIC YEP
Asian oil product demand showed little improvement last
week, with most product margins declining for all major fuels
and dragging down the benchmark Singapore refining margin.
The benchmark Singapore cracking margin -- a measure of the
profitability of advanced oil refiners--narrowed to an average
of $3.29/bbl against Dubai crude in the week ended Aug. 30
compared with $3.97/bbl a week earlier, according to Facts
"Margins are being pressured by simultaneous weakness across
the barrel, with gasoline, gasoil and fuel oil cracks all
deteriorating recently," FGE said, adding that the Singapore refining margin fell to its lowest
level since late 2011.
Asian light distillate cracks are likely to remain under
pressure, with gasoline cracks weakening as the summer driving
season in the US and Europe draws to a close, lowering
seasonal exports by Asian refineries.
"Naphtha cracks are seeing some support from the shortfall
in Libyan crude and condensate exports, which could begin to
tighten supplies of European naphtha available to Asia,"
Gasoline cracks are at a 10-month low, rising just 28 cents
last week to average $6.52/bbl, while naphtha cracks were
steady, declining just 5 cents to average $6.48/bbl.
The outlook for middle distillates -- mainly diesel and jet
fuel -- is stronger than previously expected due to heating
demand with the onset of winter in North Asia and other parts
of the world and tighter supply.
"Global gasoil demand is projected to rise by nearly 700,000
barrels a day in the fourth quarter from the third quarter,
while gasoline demand is forecast to fall by 100,000-200,000
barrels a day over the same period," Barclays said in a
It said global refinery expansions and upgrades expected in
the second half of this year were previously a threat to
distillate cracks but are now seeing substantial delays and
However, BNP Paribas said any gains in the diesel market
will be capped by higher supply as China adds refining capacity and Indian exports rise.
Last week, the benchmark 500ppm-sulfur gasoil crack fell
$1.41 to average $14.89/bbl, while the jet fuel crack narrowed
by 86 cents to $16.26/bbl.
Meanwhile, margins for fuel oil in Asia continue to
deteriorate due to weak demand from shipping, arbitrage inflows
from the West and rising output from refineries.
The crack for 380-cst high-sulfur fuel oil fell $2.63/bbl to
average minus $14.35 last week, its lowest level in over five
years, FGE said.
"As such, the outlook for fuel oil continues to look very
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