2023-04-25 12:14:35
Mihai Nicut (e-nergia.ro)
Refining margins are falling sharply, especially in Europe, amid an abundance of fuels produced from Russian crude and lower demand, especially for diesel, which will lead to lower refinery profits, Archyde.com reports. However, consumers benefit from lower prices – in Romania, for example, retail prices fell in less than three weeks by more than 40 pennies per liter.
Global diesel margins have halved since February, hitting refiner profits, while Russian exports continue despite sanctions and helped fuel output in China and India hit record highs in March.
The world had expected Western sanctions and price caps on Russian crude and oil products, introduced in December and February in turn, to tighten global oil supplies.
But Russia continued to supply oil at low cost, allowing its biggest customers – India and China – to boost refinery output and boost exports. Russian oil products are sent in large volumes to oil hubs for storage and re-export around the world.
In addition, several new refineries in the Middle East and China will come online this year, which will produce more petroleum products for export, further reducing refining margins.
India’s Reliance Industries, operator of the world’s largest refinery complex, said on Friday that diesel margins fell as diesel supplies from Russia remained firm, while an unusually mild winter in Europe led to stockpiles .
Demand for diesel to replace natural gas in power generation also fell after spot liquefied natural gas (LNG) prices fell from historic highs, the company said.
Benchmark diesel margins in Europe fell last week to their lowest level since February 2022 at around $13.70 a barrel, according to Archyde.com estimates, pressured by high import volumes and the restart of French refineries after strikes.
Similarly, diesel margins in Asia fell 31% in April, last week hitting their lowest level since January 2022 at around $14 a barrel due to high inventories and as European demand was decrease
The profit from processing a barrel of Brent crude at a typical European refinery fell by about 71% to its lowest level since January last year, at $3.56 a barrel in April, while profit margins from refining in Asia fell about 57% to $2.54 a barrel this month.
In the U.S., demand for distillates is quite weak, and this is corroborated by a host of macroeconomic indicators, including industrial production, which is showing signs of slowing, said Mathew Blair, refining analyst at energy research firm Tudor. Pickering, Holt & Co.
However, US gasoline margins remain high ahead of the summer season (consumption rises, world travels more) and low inventories, supporting overall refining margins. Taking into account West Texas Intermediate (WTI), the benchmark for the US market), US refinery margins are around $21 a barrel, Refinitiv data shows.
Gasoline inventories unexpectedly rose last week for the first time in eight weeks, but are still 9.9 million barrels below the 2015-2019 average and 8.8 million barrels below last year’s levels, it said energy consulting company FGE.
In Asia, refiners increased gasoline production and cut diesel to improve margins. Higher gasoline production and rising exports from China could reduce the region’s month-over-month deficit in May, FGE added in an April 21 note.
Benchmark petrol margins in Europe are also under pressure due to a sharp drop in demand from key markets in West Africa
Deliveries from northwest Europe so far in April to Africa and across the Atlantic are at 1.27 million tonnes, down from the 1.79 million tonnes exported last month and well below the 1.84 million exported in the same period last year, according to Refinitiv data.
Russia has stepped up fuel deliveries to African countries after the European Union banned Russian products on February 5.
As a result of consumption data from the market and the decrease in margins, fuels became cheaper in Romania. At the same gas station of the Romanian distribution market leader, the price of gasoline decreased by 23 pennies per liter in the last three weeks, and that of diesel by 42 pennies per liter.
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