MOSCOW (MRC) -- Oil refiners are ramping up output to meet a synchronized uptick in demand across Asia, Europe and the United States, but plant maintenance and high natural gas prices will constrain supply in the fourth quarter, reported Reuters with reference to company officials and analysts' statements.
This comes as profits for producing ground transportation fuels such as diesel and gasoline have rebounded globally for the first time since the start of the pandemic, as countries gradually emerge from COVID-19 movement restrictions.
A coal shortage across Europe and Asia, which has forced some power generators to burn kerosene, diesel or fuel oil and stock up ahead of the peak winter heating demand, is also supporting global oil prices.
Global crude and key refined product prices have risen more than 60% in 2021 to multi-year highs.
"Refining margins have finally found some ground," said Sri Paravaikkarasu, director of Asia oil at energy consultancy FGE, as she forecast a "big increase" in crude runs this winter.
The increase will be "led by India, followed by South Korea, while Taiwan and Japan will increase runs as well, as refiners try to take advantage of the current high margins", she added.
Asia's crude runs are expected to reach 29.5 MM barrels per day (bpd) in the fourth quarter, versus 29.1 MMbpd a yr ago and 30.3 MMbpd over October-December in 2019, Paravaikkarasu said.
Taiwan's Formosa Petrochemical Corp, one of Asia's top fuel exporters, said it plans to process 400,000 bpd in November, up from 370,000-380,000 bpd in October. That is expected to rise to 460,000 bpd, or 79% of Formosa's capacity, in December and January 2022, spokesman KY Lin said.
"The increase in output won't happen so quickly as we have maintenance at a unit in October," he noted.
In South Korea, a major refiner plans to boost output in the fourth quarter by about 5% versus the third quarter, a source familiar with the matter said, declining to name the company.
An executive at India's Hindustan Petroleum Corp Ltd said the company's group refineries were operating at full capacity.
Singapore complex refining margins, a proxy for refiner profitability in top oil consuming region Asia, hit their highest since September 2019 above USD8 a barrel this month. The margins had turned negative last yearr, plumbing a record low in May, as the pandemic eroded demand.
In Northwest Europe, refining margins topped USD9 in mid-October, the highest since April 2020, while US Gulf Coast refining margins are currently around USD14, up nearly three-fold from the same period a yr ago, Refinitiv Eikon data shows.
The spike in margins comes against the backdrop of a steady drop in inventories across key markets.
We remind that, as MRC informed before, Formosa Plastics Company (FPC), part of Formosa Petrochemical, took off-stream its No. 1 cracker in Mailiao, Taiwan for a scheduled turnaround on 8 June, 2021. This cracker with an annual capacity of 700,000 tons of ethylene and 350,000 tons of propylene was expected to remain shut unitl mid-July, 2021.
Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,868,160 tonnes in the first nine months of 2021, up by 18% year on year. Shipments of all grades of ethylene polymers increased. At the same time, PP shipments to the Russian market were 1,138,510 tonnes in the first nine months of 2021, up by 30% year on year. Supply of propylene homopolymer (homopolymer PP) and block-copolymers of propylene (PP block copolymers) increased, whereas supply of injection moulding PP random copolymers decreased significantly.
MRC