MOSCOW (MRC) -- Asia’s oil refiners are considering reducing output after margins slumped to their lowest for the season since 2003, said Hydrocarbonprocessing.
Companies that planned to trim output include SK Energy, a unit of SK Innovation, the Singapore Refinery Company (SRC), owned by PetroChina and Chevron Corp and at least one refiner in Thailand, five people familiar with the matter said.
In China, independent refiners known as ‘teapots’, which account for about a fifth of the country’s crude imports, operated at below 50% of capacity on average in April through May, versus 64% in the first quarter, said Zang Wengang, an analyst with Sublime Information Co. A spokeswoman for SK Innovation spokeswoman declined to comment, while SRC did not respond to a request for comment.
The people familiar with the matter declined to be identified because they are not authorized to speak to media. Rising crude purchasing costs have hit refiners’ bottom line. “We plan to lower (the operating rate) a bit...soon,” one of the sources said.
Spot crude cargoes have sold at multi-year high premiums as U.S. sanctions on Iran and Venezuela reduced supplies for Asia while a crisis in Russia over contaminated crude boosted Brent prices.
Meanwhile, excess supplies of light products, gasoline and petrochemical feedstock naphtha have squeezed margins further. Margins at a refinery complex in Singapore are at their lowest for this time of the year since 2003, even narrower than lows seen in 2009’s global financial crisis, data showed.
The profits are more than USD3 a barrel lower than the average for the past decade since 2009. Next month, Middle East producers led by top exporter Saudi Arabia are set to raise official selling prices (OSP) for a fourth straight month to track stronger spot markets.
Crude prices “are too high while product cracks (profit margins) are getting worse,” another source from a north Asian refiner said, adding that refiners are cutting cost by buying cheaper straight-run fuel oil to process at secondary refining units.
MRC