Asian refiner profits for transport fuels plunge on virus-fighting measures
Oil refiners’ profits for transportation fuels fell further this week, with the margin for gasoline turning negative for the first time in more than a year, according to Refinitiv data.
The margins plunged to new multi-year or multi-month lows this week after more countries globally imposed further travel restrictions and curbed domestic movements as part of measures to slow down spread of the coronavirus.
Airlines and airports are facing a huge shock as they battle a cash crunch resulting from the coronavirus, while gasoline demand in the United States, the world’s largest oil consumer, is plunging as state and local governments advise people to stay home and businesses shut.
In Asia, refiners are now losing 78 cents on every barrel of gasoline they produce from Brent crude, their widest loss in 13 months, Reuters data showed. GL92-SIN-CRK
U.S. gasoline refining margins RBc1-CLc1 fell a whopping 95% on Monday - briefly turning negative - to settle at 28 cents per barrel, their lowest since December 2008.
Asian refining margins, or cracks, for jet fuel plunged to $4.71 per barrel over Dubai crude, the lowest on record for Refinitiv data going back to March 2009. They were at $7.70 on Friday.
“I don’t expect any recovery yet for jet fuel (margins), and I’m very much concerned (to know) if the current level is bottom yet ... But jet fuel will be the last to recover when the economy recovers,” a Singapore-based jet fuel trader said.
“The world has to wait for every country to go through this virus peak. Then demand will slowly come back, but my guess is probably not before late third quarter,” she said.
Cracks for aviation fuel have shed nearly 70% since the beginning of this year as flight cancellations across regions led to unprecedented losses for airlines.
Asian refiners may have to curtail jet fuel output due to the weakening demand. Jet fuel cannot typically be stored for long periods as its quality would degrade, increasing the incentive for refiners to produce less of the fuel.
“When crude prices fell heavily early last week… it gave incentive to refineries to keep runs unchanged. Eventually, with virus-related situation developing, it’s now the second time for global refineries to think of run cuts again,” a Seoul-based middle distillates trader said.
Reporting by Seng Li Peng and Koustav Samanta; Writing by Florence Tan; Editing by Christian Schmollinger and Tom Hogue
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