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Wide gasoil and gasoline margin divergence to persist into 2023 – P66

A divergence between refiners’ margins for gasoil and gasoline will continue until the middle of 2023 as margins for the industrial fuel rise due to the upcoming European Union ban on Russian oil, an industry analyst said.

“It will be a very difficult phase of readjusting when the ban fully takes effect which will continue to push gasoil margins higher,” Sri Paravaikkarasu, director of market analysis at Phillips 66 PSX.N, told a forum at the Asia Pacific Petroleum Conference (APPEC).

Refiners are running hard to meet extra winter demand for gasoil, so gasoline will be dumped into the market as a byproduct since the summer driving demand season is over, she added.
Gasoline consumption has come under pressure as high fuel prices have curbed demand for the motor fuel while gasoil has been underpinned by tight global supplies because exports from Russia have declined as a result of the Ukraine war.

Gasoil cracks GO10SGCKMc1 have more than doubled to $32.57 a barrel over Dubai crude since the beginning of the Russia-Ukraine crisis in February, while gasoline margins GL92-SIN-CRK have weakened by over 96% to 43 cents per barrel over Brent crude oil, Refinitiv data showed. The divergence fluctuates according to seasonal demand cycles but is typically much narrower.

Naphtha margins NAF-SIN-CRK flipped to a discount of $1.65 a tonne over Brent crude, sinking over 100% in the same period.

Russian exports could fall further as the EU will ban Russian oil product imports from Feb. 5 although Group of Seven nations are working on a Russian oil price cap to minimise supply disruptions while limiting Moscow’s oil revenues.

P66’s Paravaikkarasu added that Asian refiners may not produce enough gasoil that can meet the winter specifications for the product in some European countries.

“It’s not just about a molecule rearrangement. Not many refineries in the East can meet the winter specification of gasoil in Europe,” she said.
Source: Reuters (Writing by Mohi Narayan; Editing by Jacqueline Wong)

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