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Asian refiners' profits slump as mild weather exacerbates oil products glut

Reuters  |  SINGAPORE 

By and Jessica Jaganathan

(Reuters) - refiners' profits in have slumped to the lowest in more than four years after refineries ramped up output in the fourth quarter and churned out excess fuel in anticipation of stronger demand during winter.

inventories are building as new refineries in and are running at full tilt, adding to Asia's supplies.

demand also slowed after global Brent crude prices jumped to more than $80 a barrel in September and as the global economic outlook turned gloomy, although a sharp retreat in prices in the past month to below $60 could start to spur demand again.

Factory activity and export orders weakened in November, prompting analysts to predict no quick rebound amid persistent trade tensions.

The margins at a typical complex refinery, a reference for profits at refineries across Asia, fell to $2.49 a barrel on Thursday, the lowest since August 2014, Refinitiv Eikon data showed.

GRAPHIC: refining margins since 2014

The margins are also the lowest for this time of the year since 2008, the data showed.

Weakness in the started in October in gasoline and naphtha, a feedstock for petrochemicals, as refiners processed more that gives a bigger yield on these products also known as light distillates.

"The glut in the market is in light oil," Martijn Rats, Morgan Stanley's said.

"The gasoline crack has deteriorated an enormous amount and is very close to zero at the moment which is very unusual."

Refiners now face losses of more than $1 a barrel for every barrel of gasoline they produced.

Spot gasoil and jet fuel cargoes are also being sold at deeper discounts after issued more export quotas for state refiners to ship products overseas and added to supplies within

The discount for gasoil, the main diesel grade with 10 parts per million (ppm) sulphur, is at its widest since 2011 when first started assessing the grade.

Several are storing gasoil off amid a mild winter that reduces demand to burn oil for heating purposes, traders said.

"It's weather driven ... a mild winter so far in and is the killer. The volatility will continue till you get strong weather support," said Sri Paravaikkarasu, of east of Suez oil for consultants FGE in Singapore.

KY Lin, a at Formosa Petrochemical Corp, one of the largest fuel exporters in Asia, is hopeful that the recent drop in could boost demand.

"Even though there's an ongoing trade war, countries will still need to use oil," he said.

GRAPHIC: Singapore refining margins slump hard amid regional glut

(Reporting by and Jessica Jaganathan; Editing by Susan Fenton)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, December 06 2018. 16:52 IST