Poor margins force Asian refiners to cut output

12-Dec-11

Refinery profits are declining in Asia from processing high-cost crude into oil products as demand for their exports fails to rise in winter, as per Reuters. GS Caltexis cutting crude runs this month by 20,000 bpd, and Singapore Refining Company, will reduce output by 3.7% at its 290,000 bpd refinery from the previous month. Though December output reduction by two companies is not very large, the move to do so is significant as it comes after a year of robust profits from processing oil to meet strong demand in China and increased demand from Japan after the March earthquake brought down several refineries. The cuts follows plans by Japan's top oil refiner, JX Nippon Oil & Energy Corp and Taiwan's Formosa Petrochemicals to shut some units for maintenance in December. Another blow was dealt by the world's top crude exporter,- Saudi Aramco, which raised the official selling prices (OSPs) for three grades to record highs, prompting buyers to consider trimming January supply. North Asian refiners will suffer a loss of around US$2 for every barrel of Arab Light they process based on the latest OSP. Chinese state-owned refiners will keep their plants running at near full capacity, despite losses, to stave off a diesel shortage, while India's Reliance Industries has not cut output. Globally, a seasonal low for gasoline in the northern hemisphere and a slowdown in petrochemical demand in line with Western economies depressed margins for light oil products, while gasoil consumption in Europe was lacklustre because of unusually mild weather. In the United States, government data showed that crude and oil product stocks rose last week.