MOSCOW (MRC) -- Oil refiners’ profits for transportation fuels fell further this week, with the margin for gasoline turning negative for the first time in more than a year, according to Refinitiv data, said Hydrocarbonprocessing.
The margins plunged to new multi-year or multi-month lows this week after more countries globally imposed further travel restrictions and curbed domestic movements as part of measures to slow down spread of the coronavirus.
Airlines and airports are facing a huge shock as they battle a cash crunch resulting from the coronavirus, while gasoline demand in the United States, the world’s largest oil consumer, is plunging as state and local governments advise people to stay home and businesses shut.
In Asia, refiners are now losing 78 cents on every barrel of gasoline they produce from Brent crude, their widest loss in 13 months. U.S. gasoline refining margins RBc1-CLc1 fell a whopping 95% on Monday - briefly turning negative - to settle at 28 cents per barrel, their lowest since December 2008.
Asian refining margins, or cracks, for jet fuel plunged to USD4.71 per barrel over Dubai crude, the lowest on record for Refinitiv data going back to March 2009. They were at USD7.70 on Friday.
“I don’t expect any recovery yet for jet fuel (margins), and I’m very much concerned (to know) if the current level is bottom yet ... But jet fuel will be the last to recover when the economy recovers,” a Singapore-based jet fuel trader said.
"The world has to wait for every country to go through this virus peak. Then demand will slowly come back, but my guess is probably not before late third quarter," she said.
Cracks for aviation fuel have shed nearly 70% since the beginning of this year as flight cancellations across regions led to unprecedented losses for airlines.
Asian refiners may have to curtail jet fuel output due to the weakening demand. Jet fuel cannot typically be stored for long periods as its quality would degrade, increasing the incentive for refiners to produce less of the fuel.
“When crude prices fell heavily early last week… it gave incentive to refineries to keep runs unchanged. Eventually, with virus-related situation developing, it’s now the second time for global refineries to think of run cuts again,” a Seoul-based middle distillates trader said.
As MRC wrote before, Saudi Aramco expects the coronavirus impact on oil demand to be short-lived and for consumption to rise in the second half of the year, Chief Executive Amin Nasser told Reuters in late February 2020.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 215,390 tonnes in the first month of 2020, up by 23% year on year. Shipments of all grades of high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) increased due to higher capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 127,240 tonnes in January 2020, up by 33% year on year. ZapSibNeftekhim's homopolymer PP accounted for the main increase in shipments.
MRC