Chinese gasoil exports may hit Asia refiner margins for rest of year
(Reuters) Asian gasoil distillates refining margins are likely to remain bearish for the next few months on larger than usual exports from China, oil analysts and traders said.
China's state oil refiners are readying to export more diesel in coming months in what is typically its period of highest consumption, which is expected to keep profit margins for the fuel near its seasonal lows.
The Asian gasoil margin was hovering below $11/bbl to Dubai crude prices last week, the lowest for this time of year since 2009, Reuters data showed.
The weakness in gasoil margins could extend until next year if Chinese refiners continue to flood the market, after exporting a record high in July on the back of continued weak domestic demand and a severe flooding curtailing use of the fuel, traders and analysts said.
"Asia's diesel woes look poised to remain in play over the coming months, as a dramatic upsurge in Chinese exports alongside brimming stockpiles at key storage hubs maintain the oversupply in the regional market and hurt margins," analysts from BMI Research said in a note.
Onshore gasoil and jet fuel inventories in Singapore were near a five-year high last week.
With independent refineries, known as "teapots," set to restart plants in the coming months following routine maintenance, diesel output is set to rise even higher, BMI said.
Chinese diesel exports are largely being sent to tanks in Singapore and Taiwan as demand has failed to keep up in the region, a middle distillates trader said.
"People are now hoping that the maintenance season in Asia and the Middle East will help to lift margins," the trader added.
Still, maintenance in Asia during Q3 is less pronounced this year compared with last, JBC Energy analysts said.
"We expect refiners globally to continue to contend with a chronic threat of middle distillate oversupply for the months to come and its potential to drag on margins is likely to increase in line with crude intake over Q4," they said.
Reporting by Jessica Jaganathan; editing by William Hardy
Comments