Singapore May 30 2022: Asian oil refiners are reaping their highest profits ever this week, spurred by higher fuel demand during peak holiday seasons as more economies recover from the COVID-19 pandemic while the region ramps up exports to Europe to replace a Russia shortfall.
Gasoline, diesel, and jet fuel crack spreads all hit fresh record highs of $22.28, $47.53, and $37.38 per barrel respectively on Thursday, thanks to a transport boom as more economies ease COVID restrictions.
The demand strength comes at a time when supplies remain tight following lower fuel exports from China and disruption to trade flows of Russian oil due to international sanctions, industry analysts said.
Complex refining margins in Asia are at their highest in more than three months, boosted by strong profits for gasoline, middle distillates, and low-sulfur fuel oil.
Indonesia has set the official Indonesia Crude Price (ICP) for Minas crude oil at $85.87 a barrel for January, up to $12.84 from the previous month, a document from the Ministry of Energy & Mineral Resources showed on Tuesday.
Asian refining margin for gasoline GL92-SIN-CRK climbed to a fresh record high of $37.27 per barrel on Friday, according to Refinitiv Eikon data which goes back to the year 2000. The crack was at $31.75 a barrel a day earlier.
A barrel of West Texas Intermediate oil costs about $110; and Brent crude, mainly refined into diesel fuel and gasoline, is at $113.
Gasoline refining margins, also known as cracks, in Northwest Europe hit a new peak last week at just above $40 a barrel last week before edging down about $10 - still near highs last seen in 2015, with stocks there plunging a quarter or 250,000 tonnes on the week.
Product cracks and refinery margins hit record highs as the market struggled to meet demand with limited refining capacity, a new BofA Global Research report has noted.
“The petroleum complex ripped higher since the start of the year on tightening inventories and concerns over lost Russian crude oil and product supplies,” the report said.
“Initially, crude oil and products moved higher together, but more recently refined products have taken the lead. RBOB-Brent and ULSD-Brent cracks hit record levels of nearly $49 per barrel and $72 per barrel in May as refiners struggled to meet rising fuel demand,” the report added.
“Shortages of jet fuel have also materialized, briefly pushing spot NYH jet fuel prices above $300 per barrel in April. Elevated gasoline and middle distillate cracks brought refinery margins to record highs too, with NWE Forties hydrocracking margins hitting $37.50 per barrel last week,” the report continued.
The report noted that the world was long refining capacity before the pandemic but added that historic closures during 2020-21 created a deficit in 2022, with capacity falling more than 400,000 barrels per day below pre-Covid levels.