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Refiners pin hopes on gasoline for post-lockdown demand recovery

May 22/2020

MOSCOW (MRC) -- Global oil refiners, battling weak profit margins, are pinning their hopes on a recovery in gasoline demand as coronavirus lockdowns start to ease in many countries around the world, reported Reuters.

Gasoline was one of fuels the hardest hit by the lockdowns as restrictions on mobility cut demand for the motor fuel by more than 50% in several regions.

Even a slight uptick in gasoline demand will provide support to overall margins, a source at a trading firm said.

In Asia, gasoline profit margins GL92-SIN-CRK turned positive on Tuesday for the first time in nearly two months as demand started to pick up.

European margins remain negative, but traders said they expect a recovery as more refineries shut down units to deal with a glut of diesel.

In terms of demand recovery, gasoline demand will improve first, followed by diesel and jet fuel, said Lee Dal-seok, senior research fellow at the Korea Energy Economics Institute.

In Britain, fuel demand rose in the past couple of weeks, the Petroleum Retailers Association said after the government eased some restrictions. The Association also said the recovery in gasoline was outpacing diesel as motorists hit the road while avoiding public transport.

The recovery in gasoline contrasts with a weaker outlook for diesel where slow demand and oversupply are still hurting refining margins.

The upside on distillates after an exit from lockdown is much smaller than for gasoline, a distillates trader said. Although he said demand for distillates from agriculture and manufacturing had remained buoyant during the lockdown.

U.S. margins to refine crude into distillates have fallen to USD10.45 a barrel, the lowest since at least 2009.

Meanwhile, U.S. gasoline stocks have fallen for three consecutive weeks to 252.9 million barrels, according to data from the Energy Information Administration. Analysts expect U.S. gasoline stocks to fall for a fourth week.

As MRC informed before, Valero's 180K bbl/day Memphis, Tenn., refinery along the Mississippi River is operating at 60%-65% of capacity after gradual rate increases in recent weeks. Rates at the Memphis refinery were reduced as low as 50% last month as demand slumped in the wake of the spread of the coronavirus.

We also remind that Valero Energy Corp restarted the small CDU at its Port Arthur refinery after repairing a valve on 25 September 2019. And in late October 2019, Valero Energy Corp shut the small crude distillation unit (CDU) at its Port Arthur refinery. The 75,000-bpd AVU 147 CDU was shut to repair a heat exchanger.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.
Author:Margaret Volkova
Tags:Europe, PP, PE, LLDPE, crude and gaz condensate, PP block copolymer, homopolymer PP, propylene, LDPE, HDPE, ethylene, petrochemistry, Valero, Rossiya, USA.
Category:General News
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