Asian refiners' profits slump as mild weather exacerbates oil products glut
SINGAPORE, (Reuters) - Oil refiners’ profits in Asia have slumped to the lowest in more than four years after refineries ramped up output in the fourth quarter and churned out excess fuel in anticipation of stronger demand during winter.
Oil inventories are building as new refineries in China and Vietnam are running at full tilt, adding to Asia’s supplies.
Oil demand also slowed after global Brent crude prices jumped to more than $80 a barrel in September and as the global economic outlook turned gloomy, although a sharp retreat in prices in the past month to below $60 could start to spur demand again.
Factory activity and export orders weakened in November, prompting analysts to predict no quick rebound amid persistent trade tensions.
The margins at a typical Singapore complex refinery, a reference for profits at refineries across Asia, fell to $2.49 a barrel on Thursday, the lowest since August 2014,
The margins are also the lowest for this time of the year since 2008, the data showed.
Weakness in the oil complex started in October in gasoline and naphtha, a feedstock for petrochemicals, as refiners processed more light oil that gives a bigger yield on these products also known as light distillates.
“The glut in the market is in light oil,” Martijn Rats, Morgan Stanley’s global oil strategist said.
“The gasoline crack has deteriorated an enormous amount and is very close to zero at the moment which is very unusual.”
Refiners now face losses of more than $1 a barrel for every barrel of gasoline they produced.
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KY Lin, a spokesman at Formosa Petrochemical Corp, one of the largest fuel exporters in Asia, is hopeful that the recent drop in oil prices could boost demand.
“Even though there’s an ongoing trade war, countries will still need to use oil,” he said.
Reporting by Florence Tan and Jessica Jaganathan Editing by Susan Fenton
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