Analysts and traders said that the rising gasoil prices have benefitted Asian refinery margin to the highest level since prior to the coronavirus pandemic.
Earlier in October, the Singapore complex refining margin soared to more than USD7/barrel, the highest since September 2019. According to Refinitiv data, refining profit margins for benchmark gasoil with 10 parts per million of sulfur are at their highest since December 2019, while the margin for 92-octane gasoline has climbed about 50% in October.
The profit margin has driven almost 60% higher in the past month, replacing gasoline as the essential component of overall refinery profits.
Gasoil demand has been on the rise as high natural gas and coal prompted power generators to find alternatives, also as the easing coronavirus-related movement transitions have raised industrial consumptions.
Looking forward, in the coming months, Asian refiners would likely see an improving momentum on the back of the winter switch from gas to oil and also the peaking of Chinese oil products exports.
Analyst Dylan Sim of consultancy FGE expected that in November and December, Asian gasoline consumption would increase by roughly 100,000 bpd on the back of the release of pent-up demand. Gasoil demand would jump by about 200,000 bpd between October and December, supported by the resumption of more economic activities.
He added that low exports from China will continue to support Asia’s gasoil complex through to the end of 2021.
Meanwhile, Wood Mackenzie analyst Daphne Ho estimated to see gasoil cracks increasing towards the end of the year, with demand expected to strengthen further over the agricultural season.
A Singapore-based gasoil trader projected that, as some plants are still shut for maintenance in October, Asian refiners would need at least a month or two to increase production which would mean that a more adequate gasoil supply would be seen starting November but that would be utilized to fulfill the potential increase in demand regionally.
