Oil refiners are ramping up output to meet a synchronised 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, company officials and analysts said.
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 and natural gas crunch 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 million barrels per day (bpd) in the fourth quarter, versus 29.1 million bpd a year ago and 30.3 million bpd over October-December in 2019, Paravaikkarasu said.
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 $8 a barrel this month.
The margins had turned negative last year, plumbing a record low in May, as the pandemic eroded demand.
In Northwest Europe, refining margins topped $9 last week, the highest since April 2020, while U.S. Gulf Coast refining margins are currently around $14, up nearly three-fold from the same period a year ago, Refinitiv Eikon data shows.