MOSCOW (MRC) -- Stronger fuel demand has boosted profits at crude oil refineries across Asia in recent weeks, but they have also been given a helping hand by lower exports of refined products from regional heavyweight China, reported Reuters.
China's exports of refined fuels dropped in October to 3.95 MM tons, snuffing out what was a slight rise in shipments in September and reverting to the declining trend seen since April.
The past four months have been the weakest for fuel exports from China since a slump in mid-2020. That was largely the result of plummeting fuel demand across Asia as many countries locked down their economies in a bid to combat the coronavirus pandemic.
October's exports of refined products were also nearly a third below the same month in 2020. Although the year-to-date figure is still up 3.8%, this is a reflection of strong exports in the first half of 2021.
There are several reasons for China's decline in fuel exports in the second half of this year - but chief among them is lower refinery utilization as independent refiners exhausted crude import permits and had to cut throughput.
A shortage of power because of constrained coal supplies also impacted refineries, with September processing of 13.64 MM barrels per day (bpd) being the lowest in 16 mos.
The decline in China's refined product exports has coincided with stronger demand in Asia, which has in turn boosted margins at the region's export-oriented refineries, notwithstanding the rally in crude oil prices.
A measure of the profit of turning a barrel of Dubai crude into products at a Singapore refinery stood at USD6.46 a bbl in early Asian trade on Thursday, while the 15-day moving average was at USD7.80.
As recently as June, the profit margin was as low as USD1.37 a bbl for the month. The recent peak of around USD8.44 in late October was the highest since September 2019.
It's perhaps no surprise that refinery margins peaked in October, as Chinese fuel exports were slipping.
There was more good news for refiners in Asia. India's fuel demand rose in October to the highest in seven mos as economic activity recovered in the world's third-biggest oil consumer.
Outside China, there are also encouraging signs of a recovering demand for fuel in Asia. Refinitiv Oil Research forecasts crude imports will rise in November from October in Japan, South Korea, Singapore and Taiwan - Asia's biggest importers behind China and India.
A ongoing recovery in fuel demand as more countries in Asia fully re-open their economies should help keep refinery margins elevated.
The 'X-factor' is whether Chinese refiners will return to the export market to capture some of the strong margins currently on offer.
As MRC informed earlier, the tight supply situation of natural gas in the global markets is expected to ease to a certain extent in 2022 as production growth is forecast to outpace demand, said Luo Yizhou, vice president of PetroChina International Co. Ltd, a subsidiary of state-owned PetroChina.
We remind that PetroChina, Asia's largest oil and gas producer,aims to have oil, gas and green energies to each account for a third of its portfolio by 2035, as the Chinese oil major shifts toward a lower-carbon future.
Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,868,160 tonnes in the first nine months of 2021, up by 18% year on year. Shipments of all grades of ethylene polymers increased. At the same time, PP shipments to the Russian market were 1,138,510 tonnes in January-September 2021, up by 30% year on year. Supply of propylene homopolymer (homopolymer PP) and block-copolymers of propylene (PP block copolymers) increased, whereas supply of injection moulding statistical copolymers of propylene (PP random copolymers) decreased significantly.