MOSCOW (MRC) -- A sudden crash in global gasoline prices in the past two weeks has dented refiners' profits, pushing up inventories in key trading hubs around the world while looming exports from China and India also add to pressure on growing stockpiles, said Reuters.
Refiners will be forced to cut gasoline output to safeguard themselves against losses and switch to producing more profitable fuels, traders say, but summer demand is also being hurt by high pump prices in the United States and Europe, and by instability and easing seasonal demand in some parts of Asia.
This has led to a rise in inventories from Singapore to Amsterdam-Rotterdam-Antwerp and the United States, according to traders, analysts and inventory data. Asia's top fuel exporter Taiwan's Formosa Petrochemical Corp could reduce operating rates at their residue fluid catalytic cracking (RFCC) units, which are now running at full capacity, by 5% in the coming weeks.
"We will sell more VLSFO (very low sulphur fuel oil) because their margins are better," Formosa's spokesperson K.Y. Lin told Reuters. VLSFO can be used as a feedstock for RFCC units to produce gasoline or sold as marine fuel. Asian gasoline margins have plunged more than 102% in July to a discount of 14 cents a barrel to Brent crude after hitting a record at a premium of USD38.05 a barrel in June, Refinitiv data showed. They are also at the lowest for this time of the year since at least 2000.
That has depressed Asian refining margins to 88 cents a barrel over Dubai crude on Monday, tumbling from a record USD30.49 in June. Chinese state refiners are expected to raise refinery runs in August-September and increase exports to lower high domestic stocks after receiving new quotas, industry sources said.
One of the sources estimated national crude throughput could claw back to 14 million barrels per day or higher, after staying under that level for most of the past 12 months partly because of COVID-19 lockdowns. India's gasoline exports could rise by 15,000-20,000 bpd, bringing August and September exports to an average of 260,000 bpd, consultancy FGE estimates, following the removal of gasoline export duty last week.
Meanwhile, first-half July gasoline imports into Asia dropped 240,000 tonnes from second-half June levels led by Indonesian declines, Asia's largest gasoline importer, FGE said in a note. In Sri Lanka and Pakistan, demand has been hit by economic and political turmoil, further exacerbating the thinning of regional margins, traders said.
FGE expects Asian gasoline demand, excluding China, to improve only marginally between July and September, averaging 80,000 bpd lower than levels seen during the same period in 2019, as high retail prices weigh on demand.
As per MRC, The U.S. Chemical Production Regional Index (U.S. CPRI) eased by 0.1% in June following gains of 0.5% in May and 1.0% in April. Chemical output was mixed across regions. The U.S. CPRI is measured as a three-month moving average (3MMA). On a 3MMA basis, chemical production within segments was mixed in June. There were gains in the production of synthetic rubber, industrial gases, coatings, manufactured fibers, synthetic dyes and pigments, adhesives, other organic chemicals, crop protection chemicals, other specialty chemicals, and fertilizers. These gains were offset by lower production of plastic resins, organic chemicals, and consumer products.