* Higher crude prices weigh on refiner profitability
* Refining margins fall 34.2 pct from 7-mth high marked in
* Weaker naphtha, gasoline, fuel oil drag on overall margins
* Refining margins unlikely to recover soon
By Mark Tay
SINGAPORE, Oct 4 Asian refining margins have
tumbled to their lowest in nearly six weeks after touching a
seven-month high in September, hit by a spike in crude prices
following OPEC's decision to curb output.
Singapore refining margins to Dubai crude DUB-SIN-REF had
fallen over 34 percent from their September-high to $4.98 per
barrel on Oct. 3, their weakest since late August.
"Higher crude prices tend to drive down margins - gasoline
margins ... should be under pressure when gasoline season is
over like it is now," said Oystein Berentsen, managing director
for crude at oil trading firm Strong Petroleum in Singapore.
The decision by the Organization of the Petroleum Exporting
Countries to reduce output to a range of 32.5-33.0 million
barrels per day (bpd) has lifted cash Dubai crude prices
DUB-1M-A by 13.6 percent in the last five trading days,
indicating that refiner feedstock costs should rise by similar
Overall refining margins have also been dragged lower by
weaker naphtha and fuel oil refining margins amid easing
post-summer gasoline demand.
Refining margin discounts for fuel oil have
widened as more supplies are expected to flow to Asia after
peak-summer demand for cooling in the Middle East fades.
Naphtha refining margins have also been hit by weaker demand
following shutdowns of naphtha crackers in Singapore and Japan,
Naphtha refining margins NAF-SIN-CRK to Brent crude
futures have fallen 22.6 percent in the last five trading days
to $36.83 per tonne.
Shell declared force majeure on base chemicals from
its ethylene cracker at its Bukom manufacturing site in
Singapore after an outage last week. The unit's feedstock is
mainly naphtha but it can also process liquefied petroleum gas
(LPG) and residual fuel.
"Shell's cracker (being) down is taking away demand so
prompt naphtha is very bearish," said a Singapore-based trader.
Middle distillate refining margins, which have held steady
around $12 per barrel to Dubai crude, were the only bright spot
for refiners, a second Singapore-based trader said, adding that
ongoing refinery maintenance in Asia was supporting prices.
"Refiners are hoping for a cold winter to boost heating oil
demand," the second trader said. Both traders declined to be
identified as they were not authorised to speak with media.
Upside for Asian refinery margins in the coming quarter is
limited as the supply glut in the naphtha market is expected to
grow and gasoline demand is likely to remain lacklustre.
"I think naphtha cracks are going to be hard to recover.
Sooner or later Qatar's Ras Laffan 2 condensate splitter will
start and it's bearish with more naphtha supply coming from
them," the first trader said.
Qatargas will start operations at its new 146,000 bpd Ras
Laffan 2 condensate splitter by the end of this month after the
firm delayed its September-scheduled start-up.
(Reporting by Mark Tay; Additional reporting by Henning
Gloystein; Editing by Joseph Radford)