Asian gasoline refining margins crash to loss-making seven-year lows
Singapore’s refinery margins for making gasoline have fallen to their weakest levels in seven years – so low that churning out this key motor fuel has become a loss-making business.
Seen as a benchmark across Asia, Singapore margins for 92 RON gasoline against Brent crude oil hit minus $1.44 a barrel on their last close on Tuesday, the lowest level since November 2011.
That means margins have slumped 112.5 percent from their 2018 peaks, hit in August.
Gasoline, once the preferred fuel of refiners, has come under intense pressure from swelling supply, and despite a one-third plunge in the cost of crude oil – a refinery’s main feedstock – since early October.
“The market should brace itself for more outflows from China with the recent release of additional export quotas,” said Sri Paravaikkarasu, director of Asia Oil at energy consultancy FGE in Singapore.
China’s government has released an additional 2 million tonnes of refined fuel export quotas for this year, mostly gasoline and diesel, taking total quotas for 2018 to about 48 million tonnes.
In South Korea, another Asian refinery hub, gasoline output and inventories are also high, said Nevyn Nah of energy consulting firm Energy Aspects.
Meanwhile, import demand in Vietnam has shrunk because of the start-up of the country’s Nghi Son oil refinery, while output in the Middle East is set to increase, Nah said.
The losses from making gasoline are weighing on overall refining profits, now at their lowest levels since August 2016 at just $2.93 a barrel, data in Refinitiv Eikon showed.
Adding to the supply overhang are concerns over an economic slowdown that could soon dent fuel consumption.
In an unusual move, China’s state council on Wednesday issued guidance to support employment as the economy slows, saying the country should pay “high attention” to the impact on employment from increasing economic headwinds.
Such as slowdown is also visible in the world’s biggest car market, China, where sales of new automobiles are on track for the first annual fall since at least 1990.
With supplies continuing to outpace demand growth in the coming months, “there is limited scope for any significant recovery in Singapore,” said FGE’s Sri.