* Refining margin to increase for first time since 2013
* Global diesel demand to grow from stagnant levels in 2016
* Pick-up in mining, infrastructure and colder weather
By Jessica Jaganathan and Florence Tan
SINGAPORE, Jan 11 Asian refiners' profit margins
from producing diesel in 2017 may rise for the first time in
four years as demand for the fuel improves in the
infrastructure, construction, mining and oil and gas exploration
A return to normal winter conditions after last year's
warmer-than-average temperatures along with a recovery in crude
oil prices that will stabilise the finances in some producer
countries will also spur higher margins, analysts and traders
Diesel demand growth will likely drive refiners' profit for
producing a barrel of diesel from Dubai crude to an average of
$11.40 a barrel in 2017, higher than the $10.70 a barrel
recorded in 2016, said Suresh Sivanandam, senior manager,
refining research Asia Pacific, at Wood Mackenzie in Singapore.
This would be the first annual increase since 2013. In 2016,
the average margin fell to a seven-year low of $10.60 a barrel,
according to data on Thomson Reuters Eikon. The 2017 forecast
would still be below the peak of $26 in 2008 when China was a
net importer of the fuel.
Coal prices that surged in 2016 should continue to provide
support for diesel demand in 2017 as miners increase their
consumption to operate machinery.
Coal miners in Indonesia and Australia boosted output
because of rising prices in 2016. That Indonesian growth should
continue in 2017, said Woodmac's Sivanandam.
"The recovery in coal prices is expected to give some boost
to diesel demand, after years of muted growth," he said.
Continuing growth in other emerging economies is also
expected to support diesel demand in Asia, said Sri
Paravaikkarasu, head of East of Suez Oil at energy consultants
Diesel is used to fuel heavy vehicles in industry and
construction as well as mining equipment and also as a heating
fuel in Europe.
China's "Belt and Road Initiative" will boost infrastructure
investments and diesel demand in Myanmar, Bangladesh and
Pakistan, said analysts from consultants Energy Aspects in a
note to clients.
The initiative "will be a key driver of infrastructure
investment in the coming years," said Energy Aspects.
GLOBAL UPTICK IN DIESEL DEMAND
Globally, diesel demand is expected to rise by 500,000
barrels per day (bpd) in 2017, following a decline of 50,000 bpd
in 2016, boosted by a pick-up in drilling activity in North
America and an uptick in mining activity in China, Energy
Spring refinery maintenance in Asia is expected to be the
heaviest since 2014, with 1 million bpd more capacity shut in
March and April this year than during the same time in 2016,
which will significantly draw down diesel stocks, the
Still, with Asian refinery capacity expansions expected to
exceed 1 million bpd in 2017, mainly in China, Vietnam and
India, diesel could come under pressure again in the second half
of the year, Energy Aspects said.
"While overall Asian demand should improve, growing refinery
and condensate splitter runs in both Asia and the Middle East
will keep the market well-supplied," said FGE's Paravaikkarasu.
(Editing by Christian Schmollinger)